This paper considers how optimal education and tax policy depends on the risk properties of human capital. It is … demonstrated that a key feature of human capital investments is whether they increase or decrease wage risk. In a benchmark model …

potentially loss averse around their expected outcome make risky investments in education and we draw on optimal tax theory to … explore the design of policy. The model highlights the critical roles played by (i) the relationship between behavioural risk … preferences, standard risk aversion and labour supply behaviour, (ii) the risk properties of education, and (iii) the degree of …

corporate tax rates. We show that differences in productivities, differences in operational and tax risk and the correlations of …