Inequality and Risk-Taking Behaviour

Ed Hopkins

Edinburgh School of Economics Discussion Paper Series from Edinburgh School of Economics, University of Edinburgh

Abstract: This paper investigates social influences on attitudes to risk and offers an evolutionary explanation of risk-taking by young low-ranked males. Becker, Murphy and Werning (2005) found that individuals about to participate in a status tournament may take fair gambles even though they are risk averse in both wealth and status. Here their model is generalised by use of the insight of Hopkins and Kornienko (2010) that in a tournament or status competition one can consider equality in terms of the status or rewards available as well as in initial endowments. While Becker et al. found that risk-taking is increasing in the equality of initial endowments, it is found here that it is increasing in the inequality of rewards in the tournament. Further, it is shown that the poorest will be risk loving if the lowest level of status awarded is sufficiently low. Thus, the disadvantaged in society rationally engage in risky behavior when social rewards are sufficiently unequal. Finally, as greater inequality in terms of social status induces gambling, it can cause greater inequality of wealth.

Keywords: risk; status; inequality (search for similar items in EconPapers)
JEL-codes: C72 D31 D62 D63 D81 (search for similar items in EconPapers)
Pages: 23
Date: 2011-05
New Economics Papers: this item is included in nep-cbe and nep-gth
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.econ.ed.ac.uk/papers/id204_esedps.pdf

Related works:
Journal Article: Inequality and risk-taking behaviour (2018)
Working Paper: Inequality and Risk-Taking Behaviour (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:edn:esedps:204

Access Statistics for this paper

More papers in Edinburgh School of Economics Discussion Paper Series from Edinburgh School of Economics, University of Edinburgh 31 Buccleuch Place, EH8 9JT, Edinburgh. Contact information at EDIRC.
Bibliographic data for series maintained by Research Office ().