Evaluating Real World Income Distributions behind the Veil of Ignorance - How Risk Averse do you have to be to Prefer Europe over the US?
The paper uses a veil of ignorance approach and income distribution data of developed countries to arrive at inequality corrected income rankings. While a risk neutral individual (based on year 2000 data) would have preferred to be born into the US rather than any European country in our sample except Luxembourg, a coefficient of relative risk aversion of 2 suffices to make several European countries look preferable. The paper also sheds light on the risk corrected average income on a gender basis and scans for times of diminished expectations, i.e. periods where the expected utility of being born into a country has reduced over time.
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- Haddad, Lawrence & Kanbur, Ravi, 1990.
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"Are Equivalence Scales the Same for the United States and Canada?,"
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International Association for Research in Income and Wealth, vol. 40(1), pages 1-17, March.
- Garner, T.I. & Phipps, S., 1993. "Are Equivalence Scales the Same for the United States and Canada?," Department of Economics at Dalhousie University working papers archive 93-02, Dalhousie, Department of Economics.
- Lancaster, Geoffrey & Ray, Ranjan & Valenzuela, Maria Rebecca, 1999. "A Cross-Country Study of Equivalence Scales and Expenditure Inequality on Unit Record Household Budget Data," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 45(4), pages 455-82, December.
- Sinn, Hans-Werner, 1995.
" A Theory of the Welfare State,"
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Wiley Blackwell, vol. 97(4), pages 495-526, December.
- Milton Friedman, 1953. "Choice, Chance, and the Personal Distribution of Income," Journal of Political Economy, University of Chicago Press, vol. 61, pages 277.
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