We develop a model of education where individuals face educational risk. Successfully entering the skilled labor sector … depends on individual effort in education and public resources, but educational risk still causes (income) inequality. We show …, because combining skill-specific tuition fees and public education spending provide both insurance and redistribution at lower …

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

income, and to calculate certainty equivalent lifetime income at different levels of education. We find that university … education is associated with about a half a million euro increase in discounted lifetime disposable income compared to … with only moderately higher lifetime income compared to compulsory education, and the entire difference is due to …