The Evidence on Credit Constraints in Post-Secondary Schooling

40 Pages Posted: 9 Aug 2002

See all articles by Pedro Manuel Carneiro

Pedro Manuel Carneiro

University College London - Department of Economics; IZA Institute of Labor Economics

James J. Heckman

University of Chicago - Department of Economics; National Bureau of Economic Research (NBER); American Bar Foundation; Institute for the Study of Labor (IZA); CESifo (Center for Economic Studies and Ifo Institute)

Multiple version iconThere are 2 versions of this paper

Date Written: June 2002

Abstract

This paper examines the family income-college enrollment relationship and the evidence on credit constraints in post-secondary schooling. We distinguish short-run liquidity constraints from the long-term factors that promote cognitive and noncognitive ability. Long-run factors crystallized in ability are the major determinants of the family income-schooling relationship, although there is some evidence that up to 8% of the U.S. population is credit constrained in a short-run sense. Evidence that IV estimates of the returns to schooling exceed OLS estimates is sometimes claimed to support the existence of substantial credit constraints. This argument is critically examined.

Keywords: Human Capital, Return to Education, Credit Constraints

JEL Classification: I28, D33, H43

Suggested Citation

Carneiro, Pedro Manuel and Heckman, James J., The Evidence on Credit Constraints in Post-Secondary Schooling (June 2002). IZA Discussion Paper No. 518. Available at SSRN: https://ssrn.com/abstract=320086

Pedro Manuel Carneiro

University College London - Department of Economics ( email )

Gower Street
London WC1E 6BT, WC1E 6BT
United Kingdom

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

James J. Heckman (Contact Author)

University of Chicago - Department of Economics ( email )

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Chicago, IL 60637
United States
773-702-0634 (Phone)
773-702-8490 (Fax)

National Bureau of Economic Research (NBER)

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American Bar Foundation

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Institute for the Study of Labor (IZA)

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Germany

CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
Germany

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