Scandinavian Working Papers in Economics
Working Papers in Economics,
University of Gothenburg, Department of Economics
No 43: ARE PEOPLE INEQUALITY AVERSE OR JUST RISK AVERSE?
Fredrik Carlsson (), Dinky Daruvala () and Olof Johansson-Stenman
Additional contact information
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,
Olof Johansson-Stenman: Department of Economics, School of Economics and Commercial Law, Göteborg University, Postal: Box 640, SE 40530 GÖTEBORG
Abstract: Individuals’ preferences for risk and inequality are measured through experimental choices between hypothetical societies and lotteries. The median relative risk aversion, which is often seen to reflect social inequality aversion, is between 2 and 3. We also estimate the individual inequality aversion, reflecting individuals’ 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. This is illustrated in simulations based on the empirical results.
Keywords: inequality aversion; risk aversion; welfare theory
JEL-codes: D63
29 pages, May 23, 2001
Full text files
gunwpe0043.pdf
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