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.
Co-author:
Dinky Daruvala
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