This study examines the effect of smallholder farmers' access to a formal climate risk transfer mechanism on their risk preferences. Survey and experimental data were collected from smallholder farmers that have access to weather index-based crop insurance (WICI) in Ethiopia. We use an...

In a model with ex-ante homogenous households, earnings risk and a general earnings function, we derive the optimal linear labor tax rate and optimal linear education subsidies. The optimal income tax trades off social insurance against incentives to work and to invest in human capital....

This paper proposes and analyzes a model of a European economy with three overlapping generations, redistributive social security, and public universities without tuition. Individuals differ ex ante. The effect of wage tax rate on occupational choice and the voting equilibrium of wage tax rate...

We study optimal nonlinear income taxation when earnings can differ because of both ability and luck, so the income tax has both a redistributive role and an insurance role. A substantial literature on optimal redistribution in the absence of uncertainty has evolved since Mirrlees' original...

According to many observers, the world is currently getting riskier along many of its dimensions. In this paper we analyse how the welfare state, i.e., social insurance that works through redistributive taxation, should deal with this trend. We distinguish between risks that can be insured by...

We find evidence in the OECD cross-country data to support the Knightian view that non-diversifiable economic risks shape equilibrium entrepreneurship in an occupational choice model. Differential social insurance of entrepreneurial and labor risk is found to be statistically significant and...