Olof Johansson-Stenman, Fredrik Carlsson () and Dinky Daruvala ()
Additional contact information
Olof Johansson-Stenman: Department of Economics, School of Economics and Commercial Law, Göteborg University, Postal: Box 640, SE 40530 GÖTEBORG
Fredrik Carlsson: Department of Economics, School of Economics and Commercial Law, Göteborg University, Postal: Box 640, SE 40530 GÖTEBORG
Dinky Daruvala: Department of Economics, Postal: University of Karlstad, 651 88 Karlstad,
Abstract: Individuals’ aversion to risk and inequality, and their concern for relative standing, are measured through experimental choices between hypothetical societies. It is found that on average individuals are both fairly inequality-averse and have a strong concern for relative income. The results are used to illustrate welfare consequences based on a utilitarian SWF and a modified CRRA utility function. It is shown that the social marginal utility of income may then become negative, even at income levels that are far from extreme.
Keywords: Well-being; Veil of ignorance; distributional considerations; welfare theory
41 pages, May 23, 2001
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