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Inequality Aversion (inequality + aversion)

Distribution by Scientific Domains
Business, Economics, Finance and Accounting100%

Selected Abstracts

Inequality Aversion versus Risk Aversion

ECONOMICA, Issue 277 2003
Yoram Kroll
Inequality aversion and risk-aversion are widely assumed in economic models; however existing economic literature fails to distinguish between the two. This paper presents methodology and a laboratory experiment, which separates inequality aversion from risk aversion. In a set of laboratory experiments, subjects had to choose between two risky alternatives which pay meaningful prizes with the same individual risk but different levels of egalitarianism. Thus, the choice of the more egalitarian alternative implies a higher level of inequality aversion. The experiment was conducted among children, some of whom live on a communal system (kibbutz) and some in the city. [source]

A Matter of Trust: From Social Preferences to the Strategic Adherence to Social Norms

NEGOTIATION AND CONFLICT MANAGEMENT RESEARCH, Issue 1 2008
Joachim I. Krueger
Abstract In a mathematical analysis of the trust game, we show that utility-maximizing trustees should establish equal payoffs or return nothing depending on the strength of their social preferences (benevolence and inequality aversion). Trustors may invest any amount depending on their social preferences and their expectations regarding the trustees' preferences. For both types of player, empirical distributions of transfers are rather flat, however, and players' morality, but not their rationality, is judged in proportion to the money transferred. This pattern of findings suggests that people are primarily motivated by self-interest, and that they adhere to relevant social norms inasmuch as they can enhance their self-image or reputation as a moral person. [source]

AN APPROXIMATION FOR THE OPTIMAL LINEAR INCOME TAX RATE

AUSTRALIAN ECONOMIC PAPERS, Issue 3 2009
JOHN CREEDY
This paper derives a convenient method of calculating an approximation to the optimal tax rate in a linear income tax structure. Individuals are assumed to have Cobb-Douglas preferences and the wage rate distribution is lognormal. First, the optimal tax rate is shown, for a general form of social welfare function, to be the smallest root of a quadratic equation involving a welfare-weighted average wage rate. Second, an approximation to this average is derived for an isoelastic social welfare function. This average depends on the degree of inequality aversion of the welfare function and the coefficient on consumption in individuals' utility functions. Calculations show that the method performs well in comparison with standard simulation methods of computing the optimal tax rate. [source]