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Are People Inequality Averse Or Just Risk Averse?

Author

Listed:
  • Carlsson, Fredrik

    (Department of Economics, School of Economics and Commercial Law, Göteborg University)

  • Daruvala, Dinky

    (Department of Economics)

  • Johansson-Stenman, Olof

    (Department of Economics, School of Economics and Commercial Law, Göteborg University)

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.

Suggested Citation

  • Carlsson, Fredrik & Daruvala, Dinky & Johansson-Stenman, Olof, 2001. "Are People Inequality Averse Or Just Risk Averse?," Working Papers in Economics 43, University of Gothenburg, Department of Economics.
    • Handle: RePEc:hhs:gunwpe:0043
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    References listed on IDEAS

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    More about this item

    Keywords

    inequality aversion; risk aversion; welfare theory;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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