Early and Late Human Capital Investments, Borrowing Constraints, and the Family
Open accessAbstract
We develop a dynastic human capital investment framework to study the importance of family borrowing constraints and uninsured labor market risk, as well as the process of intergenerational ability transmission, in determining human capital investments in children at different ages. We calibrate our model to data from the Children of the National Longitudinal Survey of Youth. While the effects of relaxing any borrowing limit at a single stage are modest, eliminating all life-cycle borrowing limits dramatically increases investments, earnings, and intergenerational mobility. The impacts of policy changes at college-going ages are greater when anticipated earlier, and shifting subsidies to earlier ages increases aggregate welfare and human capital.
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Caucutt and Lochner (2020) find that policies relaxing financial constraints at a single stage of the life cycle have only moderate effects, while eliminating financial constraints throughout has a large impact on the educational investments of poorer families and on social mobility.
“For example, Caucutt and Lochner (2020) find that while policies that relax financial constraints at a single stage of the life cycle have only moderate effects, eliminating financial constraints throughout has a large impact on the educational investments of poorer families and on social mobility.”
From Educational Inequality* (2022) · cites this paper as Caucutt and Lochner (2020)
Cites
On the Specification and Estimation of the Production Function for Cognitive Achievement
Todd, P. E., & Wolpin, K. I. (2003) · The Economic Journal · doi:10.1111/1468-0297.00097 · Cited by 1,514 · see citing works
The Myth of Achievement Tests: The GED and the Role of Character in American Life
Heckman, J. J., Humphries, J. E., & Kautz, T. (2013) · University of Chicago Press · doi:10.7208/chicago/9780226100128.001.0001 · Cited by 73 · see citing works
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<i>Role of Income and Family Influence on Child Outcomes</i>
Heckman, J. J. (2008) · Annals of the New York Academy of Sciences · doi:10.1196/annals.1425.031 · Cited by 90 · see citing works
The Long-Term Distributional and Welfare Effects of Covid-19 School Closures
Fuchs-Schündeln, N., Krueger, D., Ludwig, A., & Popova, I. (2020) · doi:10.3386/w27773 · Cited by 84 · see citing works
The Distributional Effects of Student Loan Forgiveness
Catherine, S., & Yannelis, C. (2023) · Journal of Financial Economics · doi:10.1016/j.jfineco.2022.10.003 · Cited by 48 · see citing works
Blanden, J., Doepke, M., & Stuhler, J. (2022) · National Bureau of Economic Research · doi:10.3386/w29979 · Cited by 47 · see citing works
Murphy, R., & Wyness, G. (2023) · Journal of Labor Economics · doi:10.1086/719995 · Cited by 34 · see citing works
The Fiscal and Welfare Effects of Policy Responses to the Covid-19 School Closures
Fuchs-Schündeln, N., Krueger, D., Kurmann, A., Lalé, E., Ludwig, A., & Popova, I. (2023) · IMF Economic Review · doi:10.1057/s41308-022-00196-2 · Cited by 33 · see citing works
- Authors
- Caucutt, E. M., & Lochner, L.
- Affiliations
- Western University (CA)
- Venue
- Journal of Political Economy
- Publisher
- University of Chicago Press
- Published
- 2020-03
- Volume
- 128
- Issue
- 3
- Pages
- 1065-1147
- ISSN
- 0022-3808 (ISSN-L)
- 1537-534X
- OpenAlex
- W2883818196
- Cited by
- 191
- References
- 2
- Citations by year
- 2026: 21 · 2025: 26 · 2024: 27 · 2023: 17 · 2022: 30 · 2021: 17 · 2020: 15 · 2019: 4 · 2018: 3 · 2017: 6 · 2016: 5 · 2015: 1 · 2014: 3 · 2013: 3 · 2012: 1
- FWCI
- 34.24
- Type
- journal article
- Language
- en
- Open access
- green
- www.nber.org
- Locations
- Journal of Political Economy (publishedVersion)
- RePEc: Research Papers in Economics (submittedVersion)
- SSRN Electronic Journal (submittedVersion)
- Econstor (Econstor) (submittedVersion)
- Scholarship@Western (Western University) (submittedVersion)
- Funders
- Social Sciences and Humanities Research Council of Canada
- Topics
- Social Sciences › Sociology and Political Science › Intergenerational and Educational Inequality Studies
- Social Sciences › Business, Management and Accounting › Accounting › Financial Literacy, Pension, Retirement Analysis
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Labor market dynamics and wage inequality
- Keywords
- human capital investment, credit constraints, household finance, intergenerational mobility, children's education, dynastic model, earnings, welfare effects
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