1 Human capital investment and portfolio choice over the life-cycle I study a theoretical model of life-cycle portfolio choice for an investor who has an option to invest in human capital but is liquidity constrained. I find that, since the young are more likely to exercise the option than the old, they are more concerned about liquidity risk (i.e. the risk that the liquidity constraint binds when it is optimal to invest). This, in turn, implies a hump-shaped pattern of lifetime risky asset holdings: portfolio share invested in equities is increasing for the young and decreasing for the older agents. Optimal investment rule and the precautionary demand for the riskless asset vary with the business cycle, which suggests potential implications for asset pricing.

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Summary: We investigate the aggregate implications of individual speci…c uncertainty about returns to investment in education in the absence of insurance markets. We do so in a general equilibrium OLG model in which physical resources must be devoted to education in order to accumulate human capital. We conclude that uncertainty with incomplete …nancial markets may strongly a¤ect individual behavior but not the aggregate of the economy. Di¤erent degrees of uncertainty will induce di¤erent intensities of human to physical capital but will not have a signi…cant impact on the long run growth rate of the economy.

The current study concentrates on the influence of family background, labor-market conditions and existing tuition policies on tertiary-education choices. We explore the natural experiment of changes in tuition policies happened during 1995-2006 years in the Russian Federation (passage from state-subsidized education to mixed forms of tertiary education: on a state-subsidized and full-tuition basis). We construct and estimate the model to analyze the different influences of family educational background, family income, and labor-market conditions on college attainment within different educational systems. First, we allow family income (together with family background) to affect students ’ abilities at the moment of college entrance. Second, we allow for heterogeneity in the quality of college education. Third, we introduce an admission selection performed by colleges, which is strictly determined by applicants ’ abilities and varies depending on the educational type (state-subsidized or fulltuition) and college quality (low and high quality institutions). The particular structure of the Russian tertiary education system (the possibility to obtain a college degree on a statesubsidized and full-tuition basis) allows us to analyze the determinants of additional financial investments into children tertiary education conditional on their abilities. The results suggest, that educational reforms in Russia during 1995-2006 years have significantly increased the importance of family income in determining college enrollment, especially on a full-tuition basis. Moreover, family income, compared to parents ’ educational background, determines to a larger extent the sorting of students among colleges with different quality of education.

Using household survey data from an Amazonian hunter-gatherer society, I analyze the relationship between village networks and capital market imperfections arising from the social structure. The village-network structure features a boundary that is based on mating norms and splits each village into two groups: a large group comprising three-quarters of the population that practice cross-cousin marriage, and a small group that is more open towards outsiders. informal contracts to In this village economy, individuals enter into nance their foraging-farming activities as well as human capital investments in pursuit of employment with loggers, cattle ranchers, and colonist farmers. The informal capital market is endogenously incomplete: while the default nancing contract can be characterized as debt, insurance in the form of equity-like