Testing for Educational Credit Constraints using Heterogeneity in Individual Time Preferences

I develop a model in which individual time discount rates have a larger eect on hu- man capital accumulation when credit constraints are binding. Impatient individuals obtain less schooling when borrowing constraints limit the ability to nance consump- tion during school. Using data from the NLSY79, I show that self-reported measures of time preferences have a signicantly higher eect on the college attendance decisions of blacks than those of whites and the decisions of low-income youths than those of high- income youths. These results provide new evidence that members of disadvantaged groups obtain lower levels of schooling because they are credit constrained.