Economic Inequality and Risk Taking

University Of North Carolina At Chapel Hill, Chapel Hill NC

Investigators

Abstract

In the last half century, economic inequality in the United States and in many other developed economies has increased dramatically. The top 0.1% of Americans now holds as much wealth as the bottom 90%. Researchers across the social sciences, and stakeholders across the political spectrum, have emphasized how growing inequality may pose threats to the social fabric of society and to the health and well-being of individuals within it. This project aims to understand how changes in the inequality of an income distribution affects the decision making of individuals. The specific hypothesis guiding this project is that higher levels of inequality encourage high risk / high reward decision strategies. Such strategies can have both benefits (for those who receive high rewards) and costs (for those who lose due to high risk). The project will use six behavioral experiments to establish the cause and effect relationship between inequality in economic outcomes and decision making strategies. The project will also employ an analysis of large-scale data from government sources (Census, US Department of Labor) and internet search data to examine the relationship between economic inequality and risk taking in everyday life. This "big data" approach will extend findings from the laboratory to consequential types of risky decisions, including financial decisions (such as taking pay day loans) as well as health decisions (such as smoking or drug use). This research will shed light on how and why economic inequality changes people's priorities when making decisions, with consequences for the health and well-being of individuals and societies.