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American Economic Review: Vol. 103 No. 4 (June 2013)

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Just Luck: An Experimental Study of Risk-Taking and Fairness

Article Citation

Cappelen, Alexander W., James Konow, Erik Ø. Sørensen, and Bertil Tungodden. 2013. "Just Luck: An Experimental Study of Risk-Taking and Fairness." American Economic Review, 103(4): 1398-1413.

DOI: 10.1257/aer.103.4.1398

Abstract

Choices involving risk significantly affect the distribution of income and wealth in society. This paper reports the results of the first experiment, to our knowledge, to study fairness views about risktaking, specifically whether such views are based chiefly on ex ante opportunities or on ex post outcomes. We find that, even though many participants focus exclusively on ex ante opportunities, most favor some redistribution ex post. Many participants also make a distinction between ex post inequalities that reflect differences in luck and ex post inequalities that reflect differences in choices. These findings apply to both stakeholders and impartial spectators.

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Online Appendix (307.82 KB) | Download Data Set (215.97 KB)

Authors

Cappelen, Alexander W. (NHH Norwegian School of Economics)
Konow, James (Kiel U and Loyola Marymount U)
Sørensen, Erik Ø. (NHH Norwegian School of Economics)
Tungodden, Bertil (NHH Norwegian School of Economics)

JEL Classifications

D63: Equity, Justice, Inequality, and Other Normative Criteria and Measurement
D81: Criteria for Decision-Making under Risk and Uncertainty
H23: Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies


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