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.
It is known from the literature on uncertainty that in cases where individuals express a preference for a high win-probability bet over a bet with high winnings they nevertheless will bid more to obtain the bet with high winnings. We investigate whether a similar phenomenon applies in the parallel social-choice situation. Here decisions are to be made between a distribution with a small group of very highincome people. Results from a number of experimental designs are analysed.
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