This paper analyses the impact of income inequality on public good provision in an experimental setting. A sample of secondary school students were recruited to participate in a simple linear public goods game where income heterogeneity was introduced by providing participants with unequal token endowments.

Many argue that it is socially inefficient to use distributional weights in cost-benefit analysis, and that doing so implies large inefficiency losses, when distributional matters can be dealt with through income taxation, instead.

Individuals’ preferences for risk and inequality are measured through choices between imagined societies and lotteries.

Social inequality aversion is measured through a veil-of-ignorance experiment with Indian students. The median relative risk aversion is found to be quite high, about 3, and independent caste.

Co-authors:

G. Gupta and O. Johansson-Stenman