This paper considers how optimal education and tax policy depends on the risk properties of human capital. It is … positive or a negative education premium. In the same model a positive intertemporal wedge is optimal. Aset of generalizations …, including non-observability of education, non-observability of consumption, and temporal resolution of uncertainty, are then …

Justification for policies to encourage investments in education, particularly for individuals at the lower end of the … potentially loss averse around their expected outcome make risky investments in education and we draw on optimal tax theory to … preferences, standard risk aversion and labour supply behaviour, (ii) the risk properties of education, and (iii) the degree of …

and because the children have different access to education. Public policy is thus called for, for vertical as well as … cannot remedy this. Quantity controls become necessary: a compulsory education package, financed by a redistributive tax … system, achieves both types of equity. Redistributive taxation and compulsory education are therefore best seen as …