I show that individuals whose unemployment risk tends to increase more when local home prices fall optimally invest …

, as well as the degree of risk aversion. Since the consumption uncertainty associated with compensation generally exceeds …

wages reflect this, with lower pay for greater uncertainty. We use the dispersion of exam grades within a field of education … as an indicator of the unobserved heterogeneity that employers face. We find solid evidence that starting wages are lower … if the variance of exam grades is higher and higher if the skew is higher: employers shift the cost of productivity risk …