Suchergebnisse

Many governments set up large public preschool programs in order to expand ac- cess to early education (crowd-in). Public preschools, however, tend to crowd-out private preschool enrollment. This makes such programs less cost-effective because public finances are used to pay for preschool for children that would have been in (private) preschool oth- erwise. Making fees for public preschools increase with family income is a way to address this trade-off. Yet this creates adverse incentives for parental labor supply. Using methods of optimal nonlinear taxation, we derive a theory of income-contingent public preschool fees that optimally trade-off crowd-in, crowd-out and parental labor supply. The optimal shape of such a fee schedule depends on labor supply elasticities, crowd-in and crowd-out elasticities as well as on the progressivity of the pre-existing income tax schedule. The more progressive the income tax schedule is, the stronger are the adverse effects of a steep preschool fee schedule on labor supply. We calibrate our model to the U.S. and use in- formation on existing public preschool programs, enrollment rates and quasi-experimental evidence. We find that the government could increase overall preschool enrolment by 11 percentage points (19 percent) solely by targeting current subsidies more efficiently and without spending one single more dollar.

This paper examines the equilibrium effects of alternative financial aid policies intended to promote college participation. We build an overlapping generations life cycle model with education, labor supply, and consumption/saving decisions. Cognitive and non-cognitive skills of children depend on the cognitive skills and education of parents, and affect education choice and labor market outcomes. Driven by both altruism and paternalism, parents make transfers to their children which can be used to fund education, supplementing grants, loans and the labor supply of the children themselves during college. The crowding out of parental transfers by government programs is sizable and thus cannot be ignored when designing policy. The current system of federal aid is valuable: removing either grants or loans would each reduce output by 2% and welfare by 3% in the long-run. An expansion of aid towards ability-tested grants would be markedly superior to either an expansion of student loans or a labor tax cut. This result is, in part, due to the complementarity between parental education and ability in the production of skills of future generations.

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 government-sponsored loan limits or grants would have no salient aggregate effects because of substantial crowding-out: every additional dollar of government grants crowds out 30 cents of parental transfers plus an equivalent amount through a reduction in student's labor supply. However, a small group of high-ability children from poor families, especially girls, would greatly benefit from more generous federal aid.

This paper compares partial and general 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, labour supply, and consumption/saving decisions. Altruistic parents make inter vivos transfers to their children. Labour supply during college, government grants and loans, as well as private loans, complement parental transfers as sources of funding for college education. We find that the current financial aid system in the U.S. improves welfare, and removing it would reduce GDP by two percentage points in the long-run. Any further relaxation of government-sponsored loan limits would have no salient effects. The short-run partial equilibirum effects of expanding tuition grants (especially their need-based component) are sizable. However, long-run general equilibrium effects are 3-4 times smaller. Every additional dollar of government grants crowds out 20-30 cents of parental transfers.