Risk aversion enters many theoretical models of human capital investment, but attitudes toward risk have not been incorporated in empirical models of human capital investment. This article develops a model of the joint investment in financial wealth and human wealth to show that human capital investment is an inverse function of the degree of relative risk aversion. Using data from the Survey of Consumer Finances, I find that wage growth is positively correlated with preferences for risk taking. More-educated individuals are also more likely to be risk takers, thus risk taking explains a portion of the returns to education.

This paper hypothesizes that the quit propensity of married men rises with an increase in their wives' income. Assuming that individuals are risk averse and that quitting is risky, the wife's income increases the husband's expected value of quitting by reducing the variance of expected family income. Using the longitudinal data from the Michigan Panel Study of Income Dynamics (PSID), the wife's income is found to have a large effect on quits. The average husband's quit rate increases by about 45% when the wife's income rises from zero to two-thirds that of the husband's. The wife's income effect nearly offsets the negative effect that marriage typically has on male quit rates.

How and by how much do supervisors enhance worker productivity? Using a company-based data set on the productivity of technology-based services workers, we estimate supervisor effects and find them to be large. Replacing a boss who is in the lower 10% of boss quality with one who is in the upper 10% of boss quality increases a team’s total output by more than adding one worker to a nine-member team would. Workers assigned to better bosses are less likely to leave the firm. A separate normalization implies that the average boss is about 1.75 times as productive as the average worker.