Journal Article

Educational Financing and Lifetime Earnings

Robert M. Sauer

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 71, issue 4, pages 1189-1216
Published in print October 2004 | ISSN: 0034-6527
Published online October 2004 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1111/0034-6527.00319
Educational Financing and Lifetime Earnings

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  • Demand and Supply of Labour
  • Education and Research Institutions
  • Wages, Compensation, and Labour Costs

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This paper formulates and estimates a dynamic programming model of optimal educational financing decisions. The main purpose of the paper is to measure the effect of short-term parental cash transfers, received during school, on educational borrowing and in-school work decisions, and on post-graduation lifetime earnings. The estimated parameters of the model imply that parental cash transfers do not significantly influence post-graduation lifetime earnings. Long-term factors such as family background and prior human capital investments are more important. Parental cash transfers do, however, significantly determine the decision to borrow or work during school and the level of lifetime consumption.

Keywords: I22; J24; J31

Journal Article.  11717 words.  Illustrated.

Subjects: Demand and Supply of Labour ; Education and Research Institutions ; Wages, Compensation, and Labour Costs

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