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Inequality Aversion and Risk Attitudes

Author

Listed:
  • Ferrer-i-Carbonell, Ada

    (CSIC Institute for Economic Analysis)

  • Ramos, Xavier

    (Universitat Autònoma de Barcelona)

Abstract

Using self reported measures of life satisfaction and risk attitudes, we empirically test whether there is a relationship between individuals inequality and risk aversion. The empirical analysis uses the German SOEP household panel for the years 1997 to 2007 to conclude that the negative effect of inequality measured by the sample gini coefficient by year and federal state is larger for those individuals who report to be less willing to take risks. Nevertheless, the empirical results suggest that even though inequality and risk aversion are related, they are not the same thing. The paper shows that the relationship between risk attitudes and inequality aversion survives the inclusion of individual characteristics (i.e. income, education, and gender) that may be correlated with both risk attitudes and inequality aversion.

Suggested Citation

  • Ferrer-i-Carbonell, Ada & Ramos, Xavier, 2010. "Inequality Aversion and Risk Attitudes," IZA Discussion Papers 4703, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp4703
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    More about this item

    Keywords

    happiness; inequality aversion; risk attitudes; well-being;
    All these keywords.

    JEL classification:

    • D3 - Microeconomics - - Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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