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Inequality and Risk-Taking
Sandeep Mishra1, Leanne S Son Hing2, Martin L Lalumière3
1Faculty of Business Administration, University of Regina, Regina, Canada.
Summary
Economic inequality increases individual risk-taking behavior. Reducing inequality among victims lowers their propensity for risk, supporting risk-sensitivity theory.
Area of Science:
- Psychology
- Behavioral Economics
- Social Science
Background:
- Societal economic inequality is linked to increased risk-taking.
- Individual-level effects of economic inequality on risk-taking remain under-investigated.
- Risk-sensitivity theory posits increased risk-taking when current state falls short of desired state.
Purpose of the Study:
- To investigate the direct impact of imposed economic inequality on individual risk-taking.
- To test predictions of risk-sensitivity theory at the individual level.
- To examine if mitigating inequality affects risk-taking behavior.
Main Methods:
- Two experiments were conducted to examine the effects of imposed economic inequality.
- Experiment 1 compared risk-taking between inequality victims, beneficiaries, and a control group.
- Experiment 2 assessed the impact of ameliorating inequality on victims' risk-taking.
Main Results:
- Victims of economic inequality consistently demonstrated higher risk-taking than beneficiaries and controls.
- Reducing inequality for victims led to a significant decrease in their risk-taking.
- Findings support the hypothesis that disparity drives increased risk-taking.
Conclusions:
- Imposed economic inequality directly elevates individual risk-taking.
- Risk-sensitivity theory is supported by these findings.
- Policies aimed at reducing economic inequality may decrease societal risk-taking.
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