1 Choices in Egalitarian Distribution: Inequality Aversion versus Risk Aversion

The authors acknowledge the participants of the ESF Guernsey meeting, June 1998, for their helpful comments and the Kruger Center of Finance for financial support. 2 Inequality aversion and risk aversion are widely assumed features of economic models. But a review of the literature revealed that inequality aversion and risk aversion are treated as separate variables. This paper presents exploratory research designed to separate inequality aversion from risk aversion. In a set of laboratory experiments, subjects chose between two alternatives with the same individual risk, but different levels of egalitarianism. Thus, the choice of the more egalitarian alternative with constant risk level implies a higher level of inequality aversion. The experiment was conducted among 211 eight-year-old children, 107 of whom live on Kibbutz and 104 in the city. Most of the children preferred equal distribution to inequality. We found no significant difference between kibbutz children and city children in inequality aversion