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Abstract:

DARP Paper
Attitudes towards Risk and Inequality: A Questionnaire-Experimental Approach, (published in Experimental Economics: Financial Markets, Auctions, and Decision Making, Andersson, F. and Holm, H. J. (ed.), Kluwer, Dewenter (2002) Chapter 9, 85-115)
Yoram Amiel and Frank A Cowell June 2001
Paper No' DARP 056:
Full Paper (pdf)

Tags: inequality; risk; experiment; transfer principle.

Orderings of income distribution in terms of inequality should be closely related to orderings in terms of risk. Using a novel mult-country questgionnaire experiment we examine the basis for this claim in terms of respondents' distributional perceptions. We show that in terms of both inequality and risk individuals consistently reject one of the standard axioms of distributional comparison. Moreover, there are significant differences in the 'maps' of inequality and risk comparisons. Rejection of the orthodox approach is less likely to occur when distributional comparisons involve extremes of the distributions.We show that certain key background variables are overwhelmingly important in predisposing individuals toward acceptance or rejection of the orthodox basis for distributional comparisons. This paper forms part of the research programme of the TMR network Living Standards, Inequality and Taxation [Contract No. ERBFMRXCT 980248] of the European Communities whose financial support is gratefully acknowledged.