Relative deprivation as a cause of risky behaviors

Combining a standard measure of concern about low relative wealth and a standard measure of relative risk aversion leads to a novel explanation of variation in risk-taking behavior identified and documented by social psychologists and economists. We obtain two results: (1) Holding individual i'...

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Bibliographic Details
Published inThe Journal of mathematical sociology Vol. 44; no. 3; pp. 138 - 146
Main Author Stark, Oded
Format Journal Article
LanguageEnglish
Published Abingdon Routledge 02.07.2020
Taylor & Francis Ltd
Subjects
Behavior
Concern about low relative wealth
Deprivation
Psychologists
Relative deprivation
Risk
Risk aversion
Risk behavior
Risk factors
Risk taking
Social preferences
Utility functions
Wealth distribution
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Summary:Combining a standard measure of concern about low relative wealth and a standard measure of relative risk aversion leads to a novel explanation of variation in risk-taking behavior identified and documented by social psychologists and economists. We obtain two results: (1) Holding individual i's wealth and his rank in the wealth distribution constant, the individual's relative risk aversion decreases when he becomes more relatively deprived as a result of an increase in the average wealth of the individuals who are wealthier than he is. (2) If relative deprivation enters the individual's utility function approximately linearly then, holding constant individual i's wealth and the average wealth of the individuals who are wealthier than he is, the individual's relative risk aversion decreases when he becomes more relatively deprived as a result of a decline in his rank. Our findings provide a theoretical support for evidence about the propensity of relatively deprived individuals to gamble and resort to other risky behaviors.
ISSN:0022-250X
1545-5874
DOI:10.1080/0022250X.2019.1664508