Workshop on "Financing Human Capital, Credit Constraints, and Market Frictions"

Federal Reserve Bank of Chicago,
Chicago, IL, June 4-6, 2012

Background Materials

Below are a few papers and links related to the Markets FED workshop. These were meant to serve as a basic introduction to some of the topics that will be covered. Links to published papers are available through JSTOR or the publishers, so some may require university credentials to download them.

Introduction of basic issues

• For a review of evidence on and economic models of borrowing constraints in education: Lochner, Lance and Alexander Monge-Naranjo. (2012). "Credit Constraints in Education," Annual Review of Economics, 4:5.1-5.32.
• Lochner, Lance, and Alexander Monge-Naranjo. (2011). "The Nature of Credit Constraints and Human Capital," American Economic Review,101(6): 2487-2529.
Frictions Workshop," Chicago, IL.
• Monge-Naranjo, Alexander. (2012). "Credit and Insurance for Investments in Human Capital," Lecture Notes, Presented at "Financing Human Capital, Credit Constraints, and Market Frictions Workshop," Chicago, IL.

Limited commitment problems

• Ravikumar, B., Yaping Shan and Yuzhe Zhang. (2012). "Notes on One-sided Commitment and College Enrollment."

Moral hazard

• Ábrahám, Árpád, Sebastian Koehne,and Nicola Pavoni. (2012). "Optimal Income Taxation with Asset Accumulation," Unpublished manuscript, European University Institute, Florence, Italy.
• For some advanced reading, see Grochulski, Borys and Tomasz Piskorski. (2010). "Risky Human Capital and Deferred Capital Income Taxation," Journal of Economic Theory, 145(3): 908-943.

Dynamic optimal taxation

• Kapicka, Marek. (2012). Notes on Dynamic Optimal Taxation with Endogenous Human Capital Formation. Research Notes, University of California, Santa Barbara.
• Kapicka, Marek. (2011). "The Dynamics of Optimal Taxation when Human Capital is Endogenous," Unpublished manuscript, University of California, Santa Barbara, Department of Economics.

Search and optimal unemployment insurance

•  Menzio, Guido and Shouyong Shi. (2010). "Block Recursive Equilibria for Stochastic Models of Search on the Job," Journal of Economic Theory, 145(4): 1453-1494.
• Acemoglu, Daron and Robert Shimer. (1999). "Efficient Unemployment Insurance," Journal of Political Economy, 107(5): 893-928.

Adverse selection problems

• Rothschild, Michael and Joseph Stiglitz. (1976). "Equilibrium in Competitive Insurance Markets: An Essay in the Economics of Imperfect Information," Quarterly Journal of Economics, 90(4): 629-649.
• Mas-Colell, Andreu, Michael Dennis Whinston and Jerry R. Green. (1995). Microeconomic Theory. New York: Oxford University Press.
• Prescott, Edward and Robert Townsend. (1984). "Pareto Optima and Competitive Equilibria with Adverse Selection and Moral Hazard," Econometrica, 52(1): 21-45.
• Guerrieri, Veronica, Robert Shimer, and Randall Wright. (2010). "Adverse Selection in Competitive Search Equilibrium," Econometrica, 78(6): 1823-1862.
• Gary-Bobo, Robert and Alain Trannoy. (2012. "Equal Treatment as a Second Best: Student Loans under Asymmetric Information," Unpublished manuscript, CREST-ENSAE.

Data and structural estimation

• Gallipoli, Giovanni. (2012). "Investigating the Patterns of Parental (Intervivos) Transfers in the NLSY97," Notes, University of British Columbia.
• Navarro, Salvador. (2011). "Using Observed Choices to Infer Agent's Information: Considering the Importance of Borrowing Constraints, Uncertainty and Preferences in College Attendance," CIBC Working Paper No. 2011-8.
• Blog on unique student loan data from the Federal Reserve Bank of New York for presentation by Brown and Lee

Additional reports on student debt, college financing, and private student loans that might be of general interest

• Wei, Christina Chang and Lutz Berkner. (2008). Trends in Undergraduate Borrowing II: Federal Student Loans in 1995-96, 1999-2000, and 2003-04, NCES 20008-179rev
• Steele, Patricia and Sandy Baum. (2009). How Much Are College Students Borrowing?, College Board Policy Brief:
• Institute for Higher Education Policy, The Future of Private Loans: Who is Borrowing, and Why?, 2006
• Sallie Mae, How America Pays for College 2011
• The FinAid! website provides a lot of up-to-date information on government and private loans in the US.  Of particular interest, may be information on different federal student loan programs, their terms and limits, different repayment plans (including relatively new income-based or income-contingent programs), and enforcement measures.
• The US Education Department also provides useful information online regarding various funding options, including both loans and grants.