of all college students fail to earn a bachelor's degree, we study a model of risky college completion. The central idea … is that students drop out of college mainly because they fail to complete the requirements for earning a degree. This … introduces two levels of ability selection that reinforce each other. (i) In college, low ability students typically do not …

We analyze optimal taxation of labor and capital income in a life-cycle framework with idiosyncratic income risk. We … provide a novel decomposition of labor income tax formulas into a redistribution and an insurance component. The latter is … independent of the social welfare function and determined by the degree of income risk and risk aversion. The optimal linear …