SOCIAL WELFARE, THE VEIL OF IGNORANCE AND PURELY INDIVIDUAL RISK: AN EMPIRICAL EXAMINATION

Abstract

We present the results of a questionnaire study with Belgian undergraduate students as respondents. We consider the relationship between people’s direct ethical preferences, their preferences behind a veil of ignorance, and their purely individual risk preferences over income distributions. The results reveal that, although there are important similarities between the three types of preferences, the first and third types form two extremes, while the second type lies in between the other two. Consistency of response patterns with the expected utility (EU) and rank-dependent expected utility (RDEU) models – natural analogues of the social welfare functions most frequently used in the literature on inequality and social welfare – is tested as well. For all three types of preferences the results reveal that, in the considered context, the RDEU model does not add explanatory power to the EU model. However, preferences appear to be relatively well described by some of the basic concepts from non-expected utility theory not usually considered in the income distribution literature.

Citation

Bosmans, K. and Schokkaert, E. (2004), "SOCIAL WELFARE, THE VEIL OF IGNORANCE AND PURELY INDIVIDUAL RISK: AN EMPIRICAL EXAMINATION", Cowell, F. (Ed.) Inequality, Welfare and Income Distribution: Experimental Approaches (Research on Economic Inequality, Vol. 11), Emerald Group Publishing Limited, Leeds, pp. 85-114. https://doi.org/10.1016/S1049-2585(04)11005-3