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Title: Higher Education Policies and Intergenerational Mobility

Citation Type: Miscellaneous

Publication Year: 2019

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Abstract: Higher education policies, such as student loans and grants, increase the possibilities for low-income students to attend college and earn high incomes later in life. For that reason , education policies are commonly assumed to increase intergenerational mobility. This paper shows that education policies have another effect, working in the opposite direction. Policies increase the overall importance of education for earnings versus other components such as luck. The human capital that education helps build is relatively persistent over generations, so that policies may actually reduce mobility. Which channel dominates is an empirical question. To that end, the paper develops a quantitative theory of the markets for higher education and labor. It features linked generations of heterogeneous agents, as well as heterogeneous colleges. A credible parameterization of the resulting model is possible due to recent empirical results. Counter to common assumptions, higher education policies turn out to decrease intergenerational mobility. Thus, there is a trade-off between welfare and intergenerational mobility. The paper includes two further sets of results. First, even when students are essentially uncon-strained in their extensive margin of college choice (going or not), they may still be constrained in their intensive margin of college choice (which college to go to). Second, the model yields a decomposition of the sources of intergenerational mobility.

Url: https://www.vinzenzziesemer.com/documents/Ziesemer_WP_2019_IM.pdf

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Authors: Ziesemer, Vinzenz

Publisher: European University Institute

Data Collections: IPUMS USA

Topics: Education

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