NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Brant Abbott

Queen's University
Department of Economics
94 University Ave
Kingston, Ontario, Canada
K7L 3N6

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NBER Working Papers and Publications

February 2013Education Policy and Intergenerational Transfers in Equilibrium
with Giovanni Gallipoli, Costas Meghir, Giovanni L. Violante: w18782
We examine the equilibrium effects of college financial aid policies building an overlapping generations life cycle model with education, labor supply, and saving decisions. Cognitive and non-cognitive skills of children depend on parental education and skills, and affect education and labor market outcomes. Education is funded by parental transfers that supplement grants, loans and student labor supply. Crowding out of parental transfers by government programs is sizable and cannot be ignored. The current system of federal aid improves long-run welfare by 6%. More generous ability-tested grants would increase welfare and dominate both an expansion of student loans and a labor tax cut.

forthcoming, Journal of Political Economy

 
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