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Inequality of opportunities vs inequality of outcomes: are western societies all alike?

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  • Lefranc, A.
  • Pistolesi, Nicolas
  • Trannoy, Alain

Abstract

This paper analyzes the relationship between income inequality and inequality of opportunities for income acquisition in nine developed countries during the 1990s. Equality of opportunity is defined as the situation where income distributions conditional on social origin cannot be ranked according to stochastic dominance criteria. We measure social origin by parental education and occupation and use the database built by Roemer et al. (2003 ). Stochastic dominance is assessed using nonparametric statistical tests. Our results indicate strong disparities in the degree of equality of opportunity across countries and a strong correlation between inequality of outcomes and inequality of opportunity. The U.S. and Italy show up as the most unequal countries in terms of both outcome and opportunity. At the opposite extreme, income distributions conditional on social origin are almost the same in Scandinavian countries even before any redistributive policy. We complement the ordinal comparison by resorting to an original scalar "Gini" index of opportunities, which can be decomposed into a risk and a return component. In our sample, inequality of opportunity is mostly driven by differences in mean income conditional on social origin, and differences in risk compensate the return element in most countries. Copyright 2008 The Authors. Journal compilation 2008 International Association for Research in Income and Wealth Published by Blackwell Publishing.

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Paper provided by Institute for Social and Economic Research in its series ISER Working Paper Series with number 2005-15.

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Date of creation: 01 Aug 2005
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Publication status: published
Handle: RePEc:ese:iserwp:2005-15

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Postal: Publications Office, Institute for Social and Economic Research, University of Essex, Wivenhoe Park, Colchester, Essex CO4 3SQ UK
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  1. John E. Roemer & Rolf Aaberge & Ugo Colombino & Johan Fritzell & Stephen P. Jenkins & Ive Marx & Marianne Page & Evert Pommer & Javier Ruiz-Castillo & Maria Jesus San Segundo & Torben Tranaes & Gert G, 2000. "To What Extent do Fiscal Regimes Equalize Opportunities for Income Acquisition Among Citizens?," Discussion Papers of DIW Berlin 222, DIW Berlin, German Institute for Economic Research.
  2. Davidson, R. & Duclos, J.-Y., 1998. "Statistical Inference for Stochastic Dominance and for the Measurement of Poverty and Inequality," G.R.E.Q.A.M. 98a14, Universite Aix-Marseille III.
  3. Deininger, Klaus & Squire, Lyn, 1996. "A New Data Set Measuring Income Inequality," World Bank Economic Review, World Bank Group, vol. 10(3), pages 565-91, September.
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  11. Cowell, F.A., 2000. "Measurement of inequality," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 2, pages 87-166 Elsevier.
  12. Peragine, Vitorocco, 1999. " The Distribution and Redistribution of Opportunity," Journal of Economic Surveys, Wiley Blackwell, vol. 13(1), pages 37-69, February.
  13. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
  14. Shorrocks, Anthony F, 1983. "Ranking Income Distributions," Economica, London School of Economics and Political Science, vol. 50(197), pages 3-17, February.
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