Abstract:
Many personally risky decisions, such as innovation and entrepreneurship, have the potential to increase overall welfare by creating positive externalities for society. Rewarding such prosocial risk-taking may be an important strategy in addressing societal challenges like, for example, the climate emergency, by promoting innovation that has positive externalities for the environment. A fundamental constraint for policy makers in rewarding such behaviour are however individuals' distributive preferences. In this paper, I provide a theoretical framework and a first experimental test of how distributive preferences are affected by potential positive externalities of risky behaviour.