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Are People Inequality‐Averse, or Just Risk‐Averse?
Author(s) -
Carlsson Fredrik,
Daruvala Dinky,
JohanssonStenman Olof
Publication year - 2005
Publication title -
economica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.532
H-Index - 65
eISSN - 1468-0335
pISSN - 0013-0427
DOI - 10.1111/j.0013-0427.2005.00421.x
Subject(s) - inequity aversion , economics , inequality , risk aversion (psychology) , welfare , economic inequality , microeconomics , public economics , demographic economics , expected utility hypothesis , financial economics , mathematics , market economy , mathematical analysis
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.