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.
Using an instrumental variables strategy, we estimate the causal effect of income on children's math and reading achievement. Our identification derives from the large, nonlinear changes in the ...Earned Income Tax Credit. The largest of these changes increased family income by as much as 20 percent, or approximately $2,100, between 1993 and 1997. Our baseline estimates imply that a $1,000 increase in income raises combined math and reading test scores by 6 percent of a standard deviation in the short run. Test gains are larger for children from disadvantaged families and robust to a variety of alternative specifications.
Education, work, and crime Lochner, Lance
International economic review (Philadelphia),
August 2004, Letnik:
45, Številka:
3
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This article develops a model of crime in which human capital increases the opportunity cost of crime from foregone work and expected costs associated with incarceration. Older, more intelligent, and ...more educated adults should commit fewer street (unskilled) crimes. White collar crimes decline less (or increase) with age and education. Predictions for age-crime and education-crime relationships receive broad empirical support in self-report data from the National Longitudinal Survey of Youth and arrest data from the Uniform Crime Reports. The effects of education, training, and wage subsidies, as well as enforcement policies on criminal behavior are discussed.
The effect of education on crime Lochner, Lance; Moretti, Enrico
The American economic review,
03/2004, Letnik:
94, Številka:
1
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We estimate the effect of education on participation in criminal activity using changes in state compulsory schooling laws over time to account for the endogeneity of schooling decisions. Using ...Census and FBI data, we find that schooling significantly reduces the probability of incarceration and arrest. NLSY data indicate that our results are caused by changes in criminal behavior and not differences in the probability of arrest or incarceration conditional on crime. We estimate that the social savings from crime reduction associated with high school graduation (for men) is about 14-26 percent of the private return.
Credit Constraints in Education Lochner, Lance; Monge-Naranjo, Alexander
Annual review of economics,
01/2012, Letnik:
4, Številka:
1
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We review studies of the impact of credit constraints on the accumulation of human capital. Evidence suggests that credit constraints have recently become important for schooling and other aspects of ...households' behavior. We highlight the importance of early childhood investments, as their response largely determines the impact of credit constraints on the overall lifetime acquisition of human capital. We also review the intergenerational literature and examine the macroeconomic impacts of credit constraints on social mobility and the income distribution. A common limitation across all areas of the human capital literature is the imposition of ad hoc constraints on credit. We propose a more careful treatment of the structure of government student loan programs and the incentive problems underlying private credit. We show that endogenizing constraints on credit for human capital helps explain observed borrowing, schooling, and default patterns and offers new insights about the design of government policy.
This paper empirically examines belief updating of the perceived probability of arrest and its criminal deterrence effects using two longitudinal data sources. While beliefs about the probability of ...arrest are positively correlated with local official arrest rates, they are unresponsive to information acquired from random individuals and local neighborhood conditions. Importantly, perceptions respond to changes in an individual's criminal and arrest history. Young males who engage in crime without getting arrested revise their perceived probability of arrest downward, while those who are arrested revise their probability upward. Estimates suggest that beliefs about the probability of arrest significantly deter crime. (JEL K42)
Parents spend considerable time and resources investing in their children’s development. Given evidence that the Earned Income Tax Credit (EITC) affects maternal labor supply, we investigate how the ...maximum available EITC amount affects a broad array of time use activities, focusing on the amount and nature of time spent with children. Using 2003–18 time use data, we find that federal and state EITC expansions increase maternal work time, reducing time devoted to home production, leisure, and time with children. However, almost none of the reduction comes from time devoted to “investment” activities, such as active learning and development activities.
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.
Empirical researchers interested in the causal effect of the endogenous regressor often use instrumental variables. When few valid instruments are available, they typically estimate restricted ...specifications that impose uniform per unit treatment effects, even when these effects are likely to vary. We show that in these cases, ordinary least squares and instrumental variables estimators identify different weighted averages of all per unit effects, so the traditional Hausman test is uninformative about endogeneity. We develop a new exogeneity test that works even when the true model cannot be estimated using IV methods as long as a single valid instrument is available. We revisit three recent empirical examples to demonstrate the practical value of our test.
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