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Altruistic Giving and Risk Taking in Human Affairs

Author

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  • Stark, Oded

    (University of Bonn)

  • Balbus, Lukasz

    (University of Zielona Gora)

Abstract

The purpose of this paper is to provide a general proposition of the relationship between altruism and risk taking. As explained in the body of the paper, we diverge from a result reported in Stark et al. (2022) and provide an expansion and a generalization of a preliminary result reported in Stark (2024). In a broad utility framework, we study the risk aversion of an altruistic person who is an active donor (benefactor) and the risk aversion of a beneficiary of an altruistic transfer. In both cases, we find that altruism lowers risk aversion. The specific case in which the utility functions of the benefactor and of the beneficiary are constant relative risk aversion (CRRA) functions constitutes a vivid example of lesser risk aversion characterization. We conclude that in terms of risk-taking behavior, a "population" endowed with altruism is uniformly more willing to take risks than a comparable "population" devoid of altruism.

Suggested Citation

  • Stark, Oded & Balbus, Lukasz, 2024. "Altruistic Giving and Risk Taking in Human Affairs," IZA Discussion Papers 17506, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp17506
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    Keywords

    altruism; altruistic transfers; the absolute risk aversion of a practicing altruistic person; intensity of altruism; variation in risk-taking preferences; the absolute risk aversion of a beneficiary of an altruistic transfer;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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