Human Capital Policy

James Heckman, Pedro Carneiro

NBER Working Paper No. 9495
Issued in February 2003
NBER Program(s):   CH   ED   LS   PE

This paper considers alternative policies for promoting skill formation that are targetted to different stages of the life cycle. We demonstrate the importance of both cognitive and noncognitive skills that are formed early in the life cycle in accounting for racial, ethnic and family background gaps in schooling and other dimensions of socioeconomic success. Most of the gaps in college attendance and delay are determined by early family factors. Children from better families and with high ability earn higher returns to schooling. We find only a limited role for tuition policy or family income supplements in eliminating schooling and college attendance gaps. At most 8% of American youth are credit constrained in the traditional usage of that term. The evidence points to a high return to early interventions and a low return to remedial or compensatory interventions later in the life cycle. Skill and ability beget future skill and ability. At current levels of funding, traditional policies like tuition subsidies, improvements in school quality, job training and tax rebates are unlikely to be effective in closing gaps.

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Document Object Identifier (DOI): 10.3386/w9495

Published: Heckman, J. and A. Krueger (eds.) Inequality in America: What Role for Human Capital Policy? MIT Press, 2003.

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