Equity and Incentive in Human Capital Investment: Evidence from a Randomized Experiment
Constantine Yannelis, Assistant Professor of Finance
Should human capital investments be financed through debt or equity? Financing human capital investment through equity contracts provides insurance to individuals, but adverse selection or moral hazard may cause these programs to collapse or disincentivize labor supply. This project aims to experimentally test for moral hazard in human capital equity contracts, partnering with a small Latin American firm that offers students’ equity contracts or Income-Share Agreements (ISAs).