PERCEPTIONS OF INEQUALITY AND RISK

Abstract

This paper analyses the principles underlying the theories of risk and inequality, and the connections between the two. Using two experimental designs, we investigate the structure of individuals’ rankings of uncertain prospects in terms of risk and inequality. We examine these individual perceptions in the light of the conventional principles underlying risk and inequality. We show that, although the principle of mean-preserving spreads and the principle of transfers are often rejected a weaker principle, “lowest-to-highest” is usually supported.

Citation

Cowell, F.A. and Cruces, G. (2004), "PERCEPTIONS OF INEQUALITY AND RISK", Bishop, J.A. and Amiel, Y. (Ed.) Studies on Economic Well-Being: Essays in the Honor of John P. Formby (Research on Economic Inequality, Vol. 12), Emerald Group Publishing Limited, Leeds, pp. 97-133. https://doi.org/10.1016/S1049-2585(04)12004-8