Risk Taking With Social Consequences

Paul Clist, Ben D’Exelle and Arjan Verschoor

Journal of Development Studies, 2025, vol. 61, issue 7, 1148-1167

Abstract: Strong egalitarian norms and preferences may affect entrepreneurship. If people feel guilty of their success they may take fewer risks, whilst if they expect their successes to be celebrated, they would take more risks. In this paper we ask whether anticipated social consequences influence risky choices. Do people take more, less or the same risk when inequality results from risky choice? We provide experimental evidence from rural Uganda. Subjects choose lotteries for themselves and a partner under different risk resolutions, allowing us to identify their type. We find anticipated social consequences influence risk taking for most people, as only one quarter are indifferent. Two-fifths are ex post inequality seeking, holding their own pay off constant, and take more risk when inequality is common. This possibility is not considered by previous experiments in the West, but is the largest category for our sample. Only one-third are ex-post inequality averse, reducing inequality of outcomes at a cost to their expected earnings. We show types are robust, and document large gender-based heterogeneity. These results imply inequality-aversion is not holding back risk taking on average. Rather there is great heterogeneity in how people respond to anticipated social consequences.

Date: 2025
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DOI: 10.1080/00220388.2025.2453523

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