Relative Deprivation: How Subjective Experiences of Income Inequality Influence Risk Preferences

Abstract

Economic inequality has been linked to changes in individual risk-taking behavior, yet the underlying mechanisms remain underexplored. In this study, I examine whether feelings of relative deprivation from upward social comparisons influence risk preferences. In the randomized experiments, participants were exposed to false information feedback designed to evoke feelings of relative deprivation, and their risk aversion was assessed through hypothetical and incentivized gambles. The results indicate that exposure to relative deprivation reduced risk aversion among men in incentivized lottery experiments, while it had no significant association with risk aversion for either gender in hypothetical gambles. Additionally, relative deprivation lowered perceived social standing and increased anxiety and concerns about personal deservingness—emotional outcomes commonly associated with experiences of relative deprivation. This study provides suggestive evidence that social comparison may influence risk preferences among men through emotional changes and offers insights into how societal inequality affects individual preferences. These findings have important implications for policy interventions aimed at addressing economic disparities and their behavioral consequences.