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Managing social risks – tradeoffs between risks and inequalities

Author

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  • Ingrid T. Rohde
  • Kirsten M. Rohde

Abstract

As societies are increasingly concerned with risks, it is important to evaluate risks not only from an individual but also from a societal perspective. Two essential dimensions of public or social risks are the inequality concerning the distribution of risks over various groups and members of society and the level of risk faced by individuals and by the society as a whole. This paper disentangles these two essential dimensions and studies people’s preferences concerning different types of allocations of risks over groups of people. We do so in a laboratory experiment with real incentives, where subjects are placed in the role of a social planner and choose between different types of allocations of risks over 10 other participants. The allocations differ only in terms of dispersion, i.e. they differ only in terms of inequality and risk. The majority of our subjects exhibit clear preferences over different types of allocations consistent with ex ante inequality and individual risk aversion, and ex post inequality and collective risk seeking behavior. These results are consistent with the literature on public risk and can be reconciled with responsibility aversion. Copyright The Author(s) 2015

Suggested Citation

  • Ingrid T. Rohde & Kirsten M. Rohde, 2015. "Managing social risks – tradeoffs between risks and inequalities," Journal of Risk and Uncertainty, Springer, vol. 51(2), pages 103-124, October.
    • Handle: RePEc:kap:jrisku:v:51:y:2015:i:2:p:103-124
    DOI: 10.1007/s11166-015-9224-5
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    5. Anita Gantner & Rudolf Kerschbamer, 2018. "Social interaction effects: The impact of distributional preferences on risky choices," Journal of Risk and Uncertainty, Springer, vol. 56(2), pages 141-164, April.
    6. Koch, Melanie & Menkhoff, Lukas & Schmidt, Ulrich, 2021. "Coupled lotteries—A new method to analyze inequality aversion," Journal of Economic Behavior & Organization, Elsevier, vol. 191(C), pages 236-256.
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    8. Steven R. Beckman & Gregory DeAngelo & W. James Smith & Ning Wang, 2016. "Is social choice gender-neutral? Reference dependence and sexual selection in decisions toward risk and inequality," Journal of Risk and Uncertainty, Springer, vol. 52(3), pages 191-211, June.

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    More about this item

    Keywords

    Inequality; Risk aversion; Public risk; Social risk; D63; D81;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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