Inequality Aversion and Risk Attitudes

29 Pages Posted: 1 Feb 2010

See all articles by Ada Ferrer-i-Carbonell

Ada Ferrer-i-Carbonell

Institut d'Anàlisi Econòmica (IAE-CSIC), Barcelona

Xavier Ramos

Universitat Autònoma de Barcelona; Institute for the Study of Labor (IZA)

Abstract

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.

Keywords: happiness, inequality aversion, risk attitudes, well-being

JEL Classification: D3, D63, I31

Suggested Citation

Ferrer-i-Carbonell, Ada and Ramos, Xavier, Inequality Aversion and Risk Attitudes. IZA Discussion Paper No. 4703. Available at SSRN: https://ssrn.com/abstract=1545130

Ada Ferrer-i-Carbonell (Contact Author)

Institut d'Anàlisi Econòmica (IAE-CSIC), Barcelona ( email )

Barcelona, Bellaterra 08193
Spain

Xavier Ramos

Universitat Autònoma de Barcelona ( email )

Dept. Economia Aplicada
Campus UAB
Bellaterra, Barcelona 08193
Spain

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

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