American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
Liquidity Constraints, Fiscal Externalities, and Optimal Tuition Subsidies
American Economic Journal: Economic Policy
vol. 9,
no. 4, November 2017
(pp. 313–43)
Abstract
A large literature focuses on two important rationales for government subsidies to college students: positive fiscal externalities from a larger tax base, and liquidity constraints. This paper provides a first attempt to gauge the relative importance of these mechanisms. I use US data in combination with two modeling approaches: calibration of a simple structural model of human capital accumulation, and a "sufficient statistics" approach. The resulting optimal subsidies are larger than median public tuition by about $3,000 per year. This finding is driven by fiscal externalities; optimal tuition subsidy policy is not sensitive to the extent of liquidity constraints.Citation
Lawson, Nicholas. 2017. "Liquidity Constraints, Fiscal Externalities, and Optimal Tuition Subsidies." American Economic Journal: Economic Policy, 9 (4): 313–43. DOI: 10.1257/pol.20150079Additional Materials
JEL Classification
- H52 National Government Expenditures and Education
- H75 State and Local Government: Health; Education; Welfare; Public Pensions
- I22 Educational Finance; Financial Aid
- I23 Higher Education; Research Institutions
- I28 Education: Government Policy
There are no comments for this article.
Login to Comment