Three Essays on Human Capital Formation and Student Loans: A Post-Keynesian Perspective

• Main Author: Serra, Gustavo Pereira
• Format: Dissertation
• Language: English
• Published: ProQuest Dissertations & Theses 01.01.2021
• Subjects: Banking; Debt service; Economics; Households; Interest rates; Student loans
• ISBN: 9798841749592

This dissertation aims to contribute to the Post-Keynesian macroeconomics literature, focusing on the sustainability of student loans and the role of human capital accumulation in economic growth. The dissertation begins with a Prologue that introduces the main micro and macro aspects of student loans from the mainstream and Post-Keynesian approaches, discussing their major points of contention. Next, the prologue presents the background of the US student loan scenario and the discussion on debt cancellation. Chapter 1 builds a neo-Kaleckian model in which households can borrow to either consume or invest in human capital. I calibrate the model using US data to simulate the economic effects of policies such as student loan forgiveness. Furthermore, using microdata from the NLSY97, I simulate default rates in those economic scenarios. The main findings are that i) household debt is sustainable in the long run for a consumption level greater than 90% of household income; and ii) student loan cancellation has only short-run economic effects, whereas reducing loan interest rates and changing the eligibility criterion for student loan forgiveness result in long-term effects.Chapter 2 puts forward a neo-Kaleckian model that considers two groups of workers - low- and high-skilled - to analyze student loan sustainability in a segmented educational market. Moreover, a cost-minimizing representative firm combines physical capital and labor in effective units in the production process, and a bargaining process between the different worker groups determines the wage gap. The main results are that i) raising the wage gap may be a necessary condition in some cases for increasing human capital accumulation; and ii) in the aggregate, human capital accumulation features a `self-defeating' effect on the wage gap.Chapter 3 addresses the contribution of human capital accumulation to solving the First Harrod Problem, which relates to the difference between demand-led and natural growth rates in the long run. After examining the use of human capital in the classical and neoclassical literature, I argue for integrating that variable in demand-led models. Moreover, given that human capital investment is a non-physical-capital-capacity creating component of aggregate demand, I discuss using this variable in Sraffian Supermultiplier models to tame the Harrodian instability.