A failure of the market for college education and on-the-job human capital

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5 Citations (Scopus)

Abstract

This paper shows that a competitive labor market fails to provide first-best incentives to invest in general human capital and this has distributive consequences: college students and firms underinvest in human capital, and this is more pronounced for high-skill students with low-income parents. Long-term contracts, together with privately provided wage-contingent loans, cannot restore efficiency and eliminate the distributive consequences of this labor market failure. Government student loans together with firm subsidies to human capital investments fully solve the market failure.

Original languageEnglish
Article number102165
JournalEconomics of Education Review
Volume84
DOIs
Publication statusPublished - Oct 2021

Keywords

  • Credit access
  • Credit constraints
  • General skills
  • Hold-up
  • Subsidies
  • Wage floors

ASJC Scopus subject areas

  • Education
  • Economics and Econometrics

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