American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
The Nature of Credit Constraints and Human Capital
American Economic Review
vol. 101,
no. 6, October 2011
(pp. 2487–2529)
Abstract
We develop a human capital model with borrowing constraints explicitly derived from government student loan (GSL) programs and private lending under limited commitment. The model helps explain the persistent strong positive correlation between ability and schooling in the United States, as well as the rising importance of family income for college attendance. It also explains the increasing share of undergraduates borrowing the GSL maximum and the rise in student borrowing from private lenders. Our framework offers new insights regarding the interaction of government and private lending, as well as the responsiveness of private credit to economic and policy changes. (JEL D14, H52, I22, I23, J24)Citation
Lochner, Lance J., and Alexander Monge-Naranjo. 2011. "The Nature of Credit Constraints and Human Capital." American Economic Review, 101 (6): 2487–2529. DOI: 10.1257/aer.101.6.2487Additional Materials
JEL Classification
- D14 Personal Finance
- H52 National Government Expenditures and Education
- I22 Educational Finance
- I23 Higher Education and Research Institutions
- J24 Human Capital; Skills; Occupational Choice; Labor Productivity