ARE PEOPLE INEQUALITY AVERSE OR JUST RISK AVERSE?

Fredrik Carlsson, Dinky Daruvala () and Olof Johansson-Stenman ()
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Dinky Daruvala: Department of Economics, Postal: University of Karlstad, 651 88 Karlstad,

No 43, Working Papers in Economics from University of Gothenburg, Department of Economics

Abstract: Individuals’ preferences for risk and inequality are measured through experimental choices between hypothetical societies and lotteries. The median relative risk aversion, which is often seen to reflect social inequality aversion, is between 2 and 3. We also estimate the individual inequality aversion, reflecting individuals’ willingness to pay for living in a more equal society. Left-wing voters and women are both more risk- and inequality averse than others. The model allows for non-monotonic SWFs, implying that welfare may decrease with an individual’s income at high income levels. This is illustrated in simulations based on the empirical results.

Keywords: inequality aversion; risk aversion; welfare theory (search for similar items in EconPapers)
JEL-codes: D63 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2001-05-23
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Are People Inequality‐Averse, or Just Risk‐Averse? (2005)
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