Scandinavian Working Papers in Economics

Working Papers in Economics,
University of Gothenburg, Department of Economics

No 42: MEASURING HYPOTHETICAL GRANDPARENTS PREFERENCES FOR EQUALITY AND RELATIVE STANDINGS

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

JEL-codes: C91; D63

41 pages, May 23, 2001

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Published as
Olof Johansson-Stenman, Fredrik Carlsson and Dinky Daruvala, (2002), 'MEASURING HYPOTHETICAL GRANDPARENTS PREFERENCES FOR EQUALITY AND RELATIVE STANDINGS', Economic Journal, vol 112, pages 362-383

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