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Robust Normative Comparisons of Socially Risky Situations

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Abstract

In this paper, we characterize and empirically implement robust normative criteria for comparing societies on the basis of their allocations of risks among their members. Risks are modelled as lotteries on the set of distributions of state-contingent pecuniary consequences. Individuals are assumed to have individualistic Von Neuman-Morgenstern preferences for these risks. Appealing to Harsanyi’s aggregation theorem, we provide empirically implementable criteria that coincide with the unanimity, over all such individual preferences, of anonymous and Pareto-inclusive Von Neuman Morgenstern social rankings of risks. The empirically implementable criteria can be interpreted as sequential expected poverty dominance. Illustrations of the usefulness of the criteria for comparing the exposure to unemployment risk of different segments of the French and US workforce and for appraising the evolution, over time, of risks of violent crimes in India are also provided.

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  • Nicolas Gravel & Benoit Tarroux, 2008. "Robust Normative Comparisons of Socially Risky Situations," IDEP Working Papers 0806, Institut d'economie publique (IDEP), Marseille, France, revised 15 Oct 2008.
    • Handle: RePEc:iep:wpidep:0806
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    More about this item

    Keywords

    Risk; Dominance; ex-ante Social Welfare; Expected Poverty; Unemployment; Crime.;
    All these keywords.

    JEL classification:

    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • D3 - Microeconomics - - Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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