This paper measures the importance of borrowing constraints on education decisions. Empirical identification of borrowing constraints is secured by the economic prediction that opportunity costs and direct costs of schooling affect borrowing-constrained and unconstrained persons differently. Direct costs need to be financed during school and impose a larger burden on credit-constrained students. By contrast, gross forgone earnings do not have to be financed. We explore the implications of this idea using four methodologies: schooling attainment models, instrumental variable wage regressions, and two structural economic models that integrate both schooling choices and schooling returns into a unified framework. None of the methods produces evidence that borrowing constraints generate inefficiencies in the market for schooling in the current policy environment. We conclude that, on the margin, additional policies aimed at improving credit access will have little impact on schooling attainment.

We estimate a life-cycle model of consumption, human capital investment, and labor supply. The interaction between human capital and labor supply toward the end of the life cycle is most novel. The estimates replicate the main features of the data, in particular the large increase in wages and small increase in labor supply at the beginning of the life cycle and the small decrease in wages but large decrease in labor supply toward the end. We show that incorporating human capital is critical when analyzing changes to Social Security.

In this paper we measure the effect of Catholic high school attendance on educational attainment and test scores. Because we do not have a good instrumental variable for Catholic school attendance, we develop new estimation methods based on the idea that the amount of selection on the observed explanatory variables in a model provides a guide to the amount of selection on the unobservables. We also propose an informal way to assess selectivity bias based on measuring the ratio of selection on unobservables to selection on observables that would be required if one is to attribute the entire effect of Catholic school attendance to selection bias. We use our methods to estimate the effect of attending a Catholic high school on a variety of outcomes. Our main conclusion is that Catholic high schools substantially increase the probability of graduating from high school and, more tentatively, attending college. We find little evidence of an effect on test scores.

We derive a formula to determine the degree to which a school choice program may harm public school stayers by luring the best students to other schools. The “cream skimming” effect is increasing in the degree of heterogeneity within schools, the school choice take-up rate of strong students relative to weak students, and the dependence of school outcomes on student body quality. We use the formula to investigate the cream skimming effect of hypothetical voucher programs on the high school graduation rate and other outcomes of the students who would remain in public school. We find small effects across a wide variety of model specifications and types of modest voucher programs.