Human Capital Formation with Endogenous Credit Constraints

@inproceedings{Lochner2002HumanCF,
  title={Human Capital Formation with Endogenous Credit Constraints},
  author={Lance J. Lochner and Alexander Monge-Naranjo},
  year={2002}
}
We study the accumulation of human capital and the behavior of consumption and earnings in a life cycle equilibrium model with endogenous borrowing constraints. Constraints arise endogenously from the inalienability of human capital and the limited punishments that creditors are able to impose on those who default. The endogeneity of borrowing constraints produces a number of interesting relationships. First, efficient borrowing limits are functions of individual observable characteristics and… CONTINUE READING