Human Capital Management White Papers
Human Capital Formation With Endogenous Credit Constraints
Overview This paper studies 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 choices, especially ability and human capital investments. Second, government policies affect the incentives to default and, hence, the limits on private borrowing. Finally, general equilibrium considerations have an additional role, since borrowing limits depend on the returns to physical and human capital.
| Publisher | National Bureau of Economic Research | File Format | PDF, requires Acrobat Rdr 5 |
|---|---|---|---|
| Date Published | March 2002 | ||
| Format | White Papers | ||
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