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Inequality aversion and risk aversion

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  • Chambers, Christopher P.

Abstract

This note shows that for two social welfare functions which are inequality averse with respect to certainty equivalents, if one is more inequality averse for certainty equivalents than the other, the household preference induced by optimally allocating aggregate bundles according to this social welfare function is more risk averse than the other. We present examples showing that this comparative static can be reversed if absolute inequality aversion is dropped. We show that the utilitarian rule always induces the least risk averse household preference among all social welfare functions (this corresponds to the sum of certainty equivalents).

Suggested Citation

  • Chambers, Christopher P., 2012. "Inequality aversion and risk aversion," Journal of Economic Theory, Elsevier, vol. 147(4), pages 1642-1651.
    • Handle: RePEc:eee:jetheo:v:147:y:2012:i:4:p:1642-1651
    DOI: 10.1016/j.jet.2010.10.016
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    References listed on IDEAS

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    Cited by:

    1. Gajdos, Thibault & Weymark, John A., 2012. "Introduction to inequality and risk," Journal of Economic Theory, Elsevier, vol. 147(4), pages 1313-1330.
    2. Mori, Osamu, 2014. "Alternative derivation of the leximin principle," Economics Letters, Elsevier, vol. 124(1), pages 157-159.
    3. Luciano Andreozzi & Matteo Ploner & Ivan Soraperra, 2013. "Justice among strangers. On altruism, inequality aversion and fairness," CEEL Working Papers 1304, Cognitive and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia.
    4. Wenman Chen & Ji Quan & Xianjia Wang, 2024. "The emergence and maintenance of cooperation in the public goods game under stochastic strategy updating rule with preference," Dynamic Games and Applications, Springer, vol. 14(5), pages 1225-1237, November.
    5. Khan, Urmee & Stinchcombe, Maxwell B., 2018. "Planning for the long run: Programming with patient, Pareto responsive preferences," Journal of Economic Theory, Elsevier, vol. 176(C), pages 444-478.
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    7. Antonini, Marcello & Costa-Font, Joan, 2025. "Healthy self-interest? Health dependent preferences for fairer health care," Journal of Economic Behavior & Organization, Elsevier, vol. 240(C).
    8. Silvester Van Koten & Andreas Ortmann & Vitezslav Babicky, 2013. "Fairness in Risky Environments: Theory and Evidence," Games, MDPI, vol. 4(2), pages 1-35, May.
    9. Luciano Andreozzi, 2019. "On Being Inequality Averse: Measurement and Behavioral Characterization," DEM Working Papers 2019/10, Department of Economics and Management.
    10. Kerstin Mitterbacher & Stefan Palan & Jürgen Fleiß, 2024. "Intergroup cooperation in the lab: asymmetric power relations and redistributive policies," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 51(4), pages 877-912, November.
    11. Zachary Michaelson, 2015. "Biases in choices about fairness: Psychology and economic inequality," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 10(2), pages 198-203, March.

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    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General

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