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In the second chapter, a joint work with Professor Maurizio Mazzocco, we propose a method to tests efficiency even when households have different preferences for risk. The method is composed of three tests. The first test is a test of homogeneous risk preferences. The second and third tests are tests of efficient risk sharing. We use this method to test efficient risk sharing in rural India. Using the first test, we strongly reject the hypothesis of identical risk preferences. We then test efficiency with and without the assumption of preference homogeneity. In the first case we reject efficient risk sharing at the village and caste level. In the second case we still reject efficiency at the village level, but we cannot reject this hypothesis at the caste level. This finding suggests that the relevant risk-sharing unit in rural India is the caste and not the village.

The third chapter estimates effect of working while in college on drop out probability. The model is estimated using data from the NLSY 1979. The estimates show that higher ability individuals are less likely to drop out of college and that the net cost of education decreases with an increase in parents' education. The policy experiments suggests that a policy which provides aid to college students and later taxes the income of college graduates increases the enrollment rate and decreases the dropout rate.