Chapter 5 Equality of Opportunity and Redistribution in Europe

Purpose – The concept of equality of opportunity (EOp) goes back to Roemer (1993, 1998) who argues that a society should guarantee its members equal access to advantage regardless of their circumstances, while holding them responsible for turning that access into actual advantage by the application of effort. First, this chapter investigates how family background influences income acquisition in 17 European countries. Second, it particularly scrutinizes how governments affect EOp through redistributive policies. Methodology – We apply two different methods in order to measure EOp: the Gini opportunity index defined by Lefranc et al. (2008) and a parametric estimation method. Effective redistribution is measured via income concepts at different stages of the tax-and-transfer schemes. Findings – We find clear country clustering in terms of EOp for Nordic, Continental European, and Anglo-Saxon countries. For Eastern Europe our results are less definitive. By examining the impact of redistributive policies in the countries under analysis, it can be concluded that both taxes and transfers reduce inequality of opportunity (IOp), with social benefits typically playing a key role. Furthermore, the equalizing impacts of the tax-benefit system on IOp differ substantially from the ones observed in the traditional notion of inequality of outcomes. Originality – We systematically compare two approaches used to identify the extent of EOp. Our results reveal that both methods yield rather robust country rankings for various circumstance sets. Furthermore, the impact of tax-benefit policies on EOp is rarely addressed in the existing literature. We contribute by focusing on effective redistribution directly related to different income concepts.