In a model with ex-ante homogenous households, earnings risk and a general earnings function, we derive the optimal … (overinvestment) in education due to risk. Education policy unambiguously allows for more social insurance if education is a risky … activity. However, if education hedges against labor market risk, optimal tax rates could be lower than without education …

by choosing aggregated income taxation if investors are (too) risk-averse, and to decrease the volume and the risk by … choosing disaggregated income taxation if investors are (too) risk-seeking …