This paper examines the family incomecollege enrolment relationship and the evidence on credit constraints in postsecondary schooling. We distinguish short run liquidity constraints from the long term factors that promote cognitive and noncognitive ability. Long run factors crystallised in ability are the major determinants of the family income schooling relationship, although there is some evidence that up to 8% of the total US 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.
Authors
Research Fellow University College London
Pedro is a Professor of Economics at University College London and an economist in the IFS' Centre for Microdata Methods and Practice (cemmap).
Research Associate University of Chicago
James is a Research Associate of the IFS and the Henry Schultz Distinguished Service Professor of Economics at the University of Chicago.
Suggested citation
Carneiro, P and Heckman, J. (2002). 'The evidence on credit constraints in post-secondary schooling' (2002)
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