Welfare Analysis with Heterogeneous Risk Preferences

• 成果类型: Article
• 署名作者: Eden, Maya
• 署名单位: Brandeis University; Center for Economic & Policy Research (CEPR)
• 刊物名称: JOURNAL OF POLITICAL ECONOMY
• ISSN/ISSBN: 0022-3808
• DOI: 10.1086/710561
• 发表日期: 2020
• 页码: 4574-4613
• 关键词: individualistic ethics; cardinal welfare; utility; INEQUALITY; EQUALITY; fairness; aversion; CHOICE

摘要

How much should society be willing to pay for reducing inequality? The standard approach to this normative question relates inequality aversion to risk aversion by treating inequality as an outcome of a lottery. However, in the presence of heterogeneous risk preferences, it is unclear whose preferences should be used for evaluating this lottery. This paper derives a social welfare function as a limit of an iterative procedure, in which each iteration constructs a lottery based on the certainty equivalents from the previous iteration. The limit of this procedure can be interpreted as the equally distributed equivalent of the initial allocation.