Family effects on education attainment

1
Family effects on education attainment

• Ellwood and Kane (2000)
• Heckman and Lochner (2000)

2
Should Government Expand Student Aid Programs?

• Current subsidy of direct costs to students at
  major US public universities is around 80.
  Should that subsidy be increased?
• To assess the effectiveness of student aid
  programs, we need to examine effects of family
  income on college attendance

3
Effects of family income on the decision to
invest in college

• Possible explanations for the reluctance to
  invest in college education
• Long-run effects
• Lack of family nurture can hinder college
  attendance
• Lack of academic readiness
• Family value and taste for higher education
• poor families are more myopia than rich families
• Poor families may have higher discount rate for
  the college wage premium in the future earnings
  profile

4

• Short-run effects
• Family credit constraints exist among poor
  families, creating obstacles for investing in
  college education
• Capital market is imperfect
• Even given the existing student aid programs,
  families could still face credit constraints for
  3 reasons
• Borrowing under the student loan programs has
  always been subject to a limit.
• Risk of not being able to repay after graduation
  (if the student will be graduated).
• There are large non-monetary cost to applying for
  financial aid.
• Low-income families are often unaware of
  eligibility rules and procedures.

5

• Two competing views
• Ellwood and Kane (2000) short-run effects of
  family income on college attendance cannot be
  ignored.
• Heckman and Lochner (2000) short-run effects of
  family income on college attendance is
  insignificant. It is the long-run effects of
  family income that most affects the decision of
  go to college.

6
Evidence

• for the short-run effects
• Ellwood and Kane (2000)
• Tables 10.5, 10.6 (pages 299-304)
• for the long-run effects
• Heckman and Lochner (2000)
• Table 2.1 (pages 55-56)