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Inequality Aversion and Risk Attitudes

  • Ferrer-i-Carbonell, Ada

    ()

    (IAE Barcelona (CSIC))

  • Ramos, Xavi

    ()

    (Universitat Autònoma de Barcelona)

Using self reported measures of life satisfaction and risk attitudes, we empirically test whether there is a relationship between individuals inequality and risk aversion. The empirical analysis uses the German SOEP household panel for the years 1997 to 2007 to conclude that the negative effect of inequality measured by the sample gini coefficient by year and federal state is larger for those individuals who report to be less willing to take risks. Nevertheless, the empirical results suggest that even though inequality and risk aversion are related, they are not the same thing. The paper shows that the relationship between risk attitudes and inequality aversion survives the inclusion of individual characteristics (i.e. income, education, and gender) that may be correlated with both risk attitudes and inequality aversion.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4703.

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Length: 29 pages
Date of creation: Jan 2010
Date of revision:
Handle: RePEc:iza:izadps:dp4703
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  15. Gert G. Wagner & Joachim R. Frick & Jürgen Schupp, 2007. "The German Socio-Economic Panel Study (SOEP) – Scope, Evolution and Enhancements," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 127(1), pages 139-169.
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