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The relationship between income inequality and inequality of opportunities in a high-inequality country: the case of Chile

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  • Javier Nunez
  • Andrea Tartakowsky

Abstract

Based on Bourguignon et al. (2005, 2007), we explore the extent to which income inequality in Chile is associated with inequality of 'opportunities', proxied by inequality in observed socioeconomic circumstances of origin. We found that equalizing a diverse set of observed circumstances across individuals reduces the Gini and the Theil coefficients by about 15 and 25%, respectively. Almost half of the effect of observed circumstances on incomes is transmitted directly to earnings, whereas the rest is indirectly transmitted through the accumulation of schooling. Further results suggest that the influence of unobserved circumstances on income inequality may be limited; hence aspects such as preferences, choices, transitory income shocks and income measurement errors may be important factors behind observed income inequality.

Suggested Citation

  • Javier Nunez & Andrea Tartakowsky, 2011. "The relationship between income inequality and inequality of opportunities in a high-inequality country: the case of Chile," Applied Economics Letters, Taylor & Francis Journals, vol. 18(4), pages 359-369.
    • Handle: RePEc:taf:apeclt:v:18:y:2011:i:4:p:359-369
    DOI: 10.1080/13504851003636172
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    References listed on IDEAS

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    1. François Bourguignon & Francisco H. G. Ferreira & Marta Menéndez, 2007. "Inequality Of Opportunity In Brazil," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 53(4), pages 585-618, December.
    2. Dante Contreras & Osvaldo Larragaña & Esteban Puentes & Tomás Rau, 2009. "Evidence for inequality of Opportunities. A Cohort analysis for Chile," Working Papers wp298, University of Chile, Department of Economics.
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    Cited by:

    1. Francisco Parro & R. Vincent Pohl, 2021. "The effect of accidents on labor market outcomes: Evidence from Chile," Health Economics, John Wiley & Sons, Ltd., vol. 30(5), pages 1015-1032, May.
    2. Rafael Carranza & Gabriel Otero & Dante Contreras, 2020. "Spatial divisions of poverty and wealth: How much does segregation matter for educational achievement?," Working Papers 543, ECINEQ, Society for the Study of Economic Inequality.
    3. Ibragimova, Zulfiya & Frants, Marina, 2021. "Measuring income opportunity inequality: A structural review and meta-analysis," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 61, pages 89-109.
    4. Alejandro Bayas & Nicolas Grau, 2021. "Inequality of Opportunity and Juvenile Crime," Working Papers wp524, University of Chile, Department of Economics.
    5. Guido Neidhöfer & Leonardo Gasparini & Matias Ciaschi, "undated". "Intergenerational mobility of economic well-being in Latin America," Working Papers 620, ECINEQ, Society for the Study of Economic Inequality.
    6. Paolo Brunori & Francisco H.G. Ferreira & Guido Neidhöfer, 2023. "Inequality of opportunity and intergenerational persistence in Latin America," WIDER Working Paper Series wp-2023-39, World Institute for Development Economic Research (UNU-WIDER).
    7. Nunez Javier I & Miranda Leslie, 2010. "Intergenerational Income Mobility in a Less-Developed, High-Inequality Context: The Case of Chile," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-17, April.

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