Educational Choice, Credit Constraints and Public Policy in an Overlapping Generations Framework.

This paper develops a two-period overlapping generations model where agents choose whether to become educated when young. While education enhances productivity, it needs to be financed by borrowing. Because of the possibility of default, lenders may ration credit. We characterize the steady-state equilibrium with and without credit constraints and show that credit rationing tends to discourage education and raise the real rate of interest.

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Year of publication:	1996
Authors:	Fender, J. ; Wang, P.
Institutions:	Department of Economics, University of Birmingham
Subject:	EDUCATION \| CREDIT \| GOVERNMENT POLICY \| FISCAL POLICY

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Series:	Discussion Papers.
Type of publication:	Book / Working Paper
Notes:	32 pages
Classification:	E60 - Macroeconomic Policy Formation, Macroeconomic Aspects of Public Finance, Macroeconomic Policy, and General Outlook. General ; E62 - Fiscal Policy; Public Expenditures, Investment, and Finance; Taxation ; H50 - National Government Expenditures and Related Policies. General ; H52 - Government Expenditures and Education ; I20 - Education. General
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005357619