Department of Economics
94 University Ave
Kingston, Ontario, Canada
Information about this author at RePEc
NBER Working Papers and Publications
|February 2013||Education Policy and Intergenerational Transfers in Equilibrium|
with Giovanni Gallipoli, Costas Meghir, Giovanni L. Violante: w18782
This paper examines the equilibrium effects of alternative financial aid policies intended to promote college participation. We build an overlapping generations life-cycle, heterogeneous-agent, incomplete-markets model with education, labor supply, and consumption/saving decisions. Driven by both altruism and paternalism, parents make inter vivos transfers to their children. Both cognitive and non-cognitive skills determine the non-pecuniary cost of schooling. Labor supply during college, government grants and loans, as well as private loans, complement parental resources as means of funding college education. We find that the current financial aid system in the U.S. improves welfare, and removing it would reduce GDP by 4-5 percentage points in the long-run. Further expansions of governmen...