HUMAN Capital Contracts in Chile : An excercise based on Income data on Chilean HE graduates

Lozano Rojas, Felipe Andres (2011): HUMAN Capital Contracts in Chile : An excercise based on Income data on Chilean HE graduates. Published in: Latin American Jounal of Economics , Vol. 49, No. 2 (29 November 2012): pp. 185-215.

Abstract

Given that a significant proportion of the Chilean education system is financed with household resources, we present human capital contracts (HCC) as an option for higher education financing for students facing financial constraints, but who could use their expected future income flows as collateral. We analyze the feasibility of HCC implementation in Chile over a set of college majors. We find that HCC can partially fund any college major in Chile and finance some majors completely, under certain conditions. Among the variables analyzed, those affecting most severely the contract pricing are initial wage level after graduation and graduation rate.

• Item Type: MPRA Paper
• Language: English
• Keywords: Higher education returns, education financing, human capital contracts, human capital earning functions, income contingent schemes
• Subjects: J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure ; Wage Differentials; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J24 - Human Capital ; Skills ; Occupational Choice ; Labor Productivity; G - Financial Economics > G1 - General Financial Markets > G13 - Contingent Pricing ; Futures Pricing; I - Health, Education, and Welfare > I2 - Education and Research Institutions > I22 - Educational Finance ; Financial Aid; C - Mathematical and Quantitative Methods > C0 - General > C01 - Econometrics

References

Assli, A. (2008), “Human Capital Contracts: An Innovative Instrument for Financing Higher Education,” in “Education in Israel: Higher Education and Elementary Schools, Proposals for Financing and Management.” Koret-Milken Institute Fellows Program, No. 26.Barr, N. (2001),The Welfare State as Piggy Bank: Information, Risk, Uncertainty, and the Role of the State. Oxford: Oxford University Press.

Barr, N. (2004), “Higher Education Funding,” Oxford Review of Economic Policy,Vol. 20, No.2:264-283.

Becker, G. (1975), Human Capital: A Theoretical and Empirical Analysis with Special Reference to Education. 2nd edition. Chicago: University of Chicago Press.

Beyer, H. (2000), “Educación y Desigualdad de Ingresos: Una Nueva Mirada” [Education and income inequality: a new perspective]. Centro de Estudios Públicos (CEP), Working Paper 297.

Centro de Microdatos (2008), “Estudio sobre Causas de la Deserción Universitaria” [Study of the causes of university attrition], Department of Economics, Universidad de Chile. Canales, A. and D. de Los Ríos (2007), “Factores Explicativos de la Deserción Universitaria” [Factors explaining university attrition]. Center of Research in Creativity and Higher Education, Universidad de Santiago de Chile.

Chapman, B. (2006), Government Managing Risk: Income Contingent Loans for Social and Economic Progress. Londong: Routledge.

Chapman, B. (2006), “Income Contingent Loans for Higher Education: International Reforms,” in E. Hanushek and F. Welch, eds., Handbook of the Economics of Education. Amsterdam: Elsevier-North Holland.

Christiansen, C., J. Schroter, and H. Skyt (2006), “The Risk-Return Trade-of in Human Capital Investment.”Institute for the Study of Labor (IZA)Discussion Papers 1962.

Superintendencia de Bancos e Instituciones Financieras (Chilean banking and financial institution regulator). “Financiamiento de Estudios de Educación Superior (Antecedentes 2006-2008)” [Financing of Higher Education (Background 2006-2008)]. Research Department, Financial Products and Banking Industry Unit.

Dinarsky, M. (1994), “Who Defaults on Student Loans? Findings From the National Postsecondary Student Aid Survey.” Economics of Education Review, Vol. 13, No. 1: 55-78.

Giovagnoli, P., G. Pizzolitto, and J. Trías(2005), “Monitoring Socio-Economic Conditions in Argentina, Chile, Paraguay y Uruguay: Chile.” Centro de Estudios Distributivos, Laborales y Sociales, Universidad Nacional de la Plata-World Bank.

González, E., D. Uribe, and S. González (2005), “Estudio sobre la Repitencia y la Deserción en la Educación Superior Chilena” [Study of Repetition and Attrition in Chilean Higher Education]. Instituto Internacional para la Educación Superior en América Latina y el Caribe(IESALC) / UNESCO.

Heckman, J.J., L.J. Lochner, and P.E. Todd (2006), “Earnings Functions, Rates of Return and Treatment Ef fects: The Mincer Equation and Beyond,” in E. Hanushek and F. Welch, eds., Handbook of the Economics of Education. Amsterdam: Elsevier-North Holland.

Hungerford, T. and G. Solon (1987), “Sheepskin Ef fects in the Returns to Education,”The Review of Economics and Statistics, Vol. 69, No. 1: 175-177.

Lozano, F. (2009), “Evaluating an Alternative to Finance Higher Education: Human Capital Contracts in Colombia,” Revista de Economía del Rosario, Vol. 12, No. 12.

Meier, V. (1999), “Economic Theories of Education.” Martin Luther Universität Halle-Wittenberg, Discussion Paper 23.

Meller, P. and D. Rappoport (2003), “Comparaciones Internacionales de la Dotación de Profesionales y la Posición Relativa Chilena” [International comparisons of teacher supply and the relative situation in Chile]. In J.J. Brunner and P. Meller, eds.. Oferta y Demanda de Profesionales y Técnicos en Chile [Supply and Demand of Professionals and Technicians in Chile]. Santiago, Chile: RIL Editores.

Mincer, J. (1974), Schooling, Experience and Earnings. New York: Columbia University Press.

Mizala, A. and P. Romaguera (2003), “Remuneraciones y Tasas de Retorno de los Profesionales Chilenos” [Compensation and Return Rates for Chilean Professionals]. In J.J. Brunner and P. Meller, ed.s, Oferta y Demanda de Profesionales y Técnicos en Chile [Supply and Demand of Professionals and Technicians in Chile]. Santiago, Chile: RIL Editores. Núñez, J. and F. Sánchez, (2002), “Empleo Informal y Evasión Fiscal en Colombia. ”Archivos de Economía, Departamento Nacional de Planeación, Colombia.

OECD-World Bank (2009). “Revisión de Políticas Nacionales de Educación: La Educación Superior en Chile” [Reviews of National Policies for Education: Tertiary Education in Chile]. Translated and published by the Chilean Ministry of Education.

Prada, C.F. (2006), “¿Es Rentable la Decisión de Estudiar en Colombia?” [Is it Worthwhile to Study in Colombia?]. Pontificia Universidad Javeriana. Paper presented for economics degree at the Pontificia Universidad Javeriana.

Palacios, M. (2003), “Options for Financing Lifelong Learning.” Human Development Network, World Bank. Policy Research Working Paper 2994.

Palacios, M. (2004), Investing in Human Capital: A Capital Markets Approach to Student Funding. Cambridge: Cambridge University Press.

Patrinos, H. and H. Oosterbeck (2008), “Financing Lifelong Earning”. Human Development Network, World Bank. Policy Research Working Paper 4569.

Sapelli, C. (2009), “Los Retornos a la Educación en Chile: Estimaciones por Corte Transversal y por Cohortes” [Return on Education in Chile: Estimations by Cross-Section and Cohort]. Instituto de Economía, Pontificia Universidad Católica de Chile. Working Paper 349.

Vandenberghe, V. and O. Debande (2005), “Deferred and Income-Contingent Higher Education Fees: An Empirical Assessment Using Belgian Data.” GIRSEF-CPU, UNESCO, No. 41.

Weldi, M. (2007), “Financing Higher Education Cost through Human Capital Contracts - An Empirical Analysis by Subject and Degree for Germany.” Working Paper, Goethe University, Frankfurt.

Woo, J. (2002), “Factors Af fecting the Probability of Default: Student Loans in California”. Journal of Student Financial Aid, Vol. 32, No. 2: 5-23.