Are People Inequality-Averse, or Just Risk-Averse?

22 Pages Posted: 25 Jul 2005

See all articles by Fredrik Carlsson

Fredrik Carlsson

Goeteborg University - School of Economics & Commercial Law

Dinky Daruvala

University of Karlstad

Olof Johansson-Stenman

Goeteborg University - School of Economics & Commercial Law

Abstract

Individuals' preferences for risk and inequality are measured through choices between imagined societies and lotteries. The median relative risk aversion, which is often seen to reflect social inequality aversion, is between 2 and 3. Most people are also found to be individually inequality-averse, reflecting a 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, which is illustrated in simulations based on the empirical results.

Suggested Citation

Carlsson, Fredrik and Daruvala, Dinky and Johansson-Stenman, Olof, Are People Inequality-Averse, or Just Risk-Averse?. Economica, Vol. 72, No. 287, pp. 375-396, August 2005, Available at SSRN: https://ssrn.com/abstract=762964

Fredrik Carlsson (Contact Author)

Goeteborg University - School of Economics & Commercial Law ( email )

Box 640
SE 405 30 Goeteborg
Sweden
+46 31-773 4174 (Phone)
+46 31-773 1043 (Fax)

Dinky Daruvala

University of Karlstad ( email )

SE-651 88 Karlstad
Sweden
+46-54-700 15 11 (Phone)
+46-54-700 17 99 (Fax)

HOME PAGE: http://www.kau.se/eng/staff/person.lasso?ID=870

Olof Johansson-Stenman

Goeteborg University - School of Economics & Commercial Law ( email )

Box 640
SE 405 30 Goeteborg
Sweden
+46-31-773 25 38 (Phone)
+46-31-773 13 26 (Fax)

HOME PAGE: http://www.handels.gu.se/econ/EEU/johansso.htm

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