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Measuring long-term inequality of opportunity

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  • Rolf Aaberge

    ()
    (Research Department, Statistics Norway)

  • Magne Mogstad

    (Research Department, Statistics Norway)

  • Vito Peragine

    (University of Bari)

Abstract

In this paper, we introduce and apply a general framework for evaluating long-term income distributions according to the Equality of Opportunity principle. Our framework allows for both an exante and an ex-post approach to EOp. Our ex-post approach relies on a permanent income measure defined as the minimum annual expenditure an individual would need in order to be as well off as he could be by undertaking inter-period income transfers. There is long-term ex-post inequality of opportunity if individuals who exert the same effort have different permanent incomes. In comparison, the ex-ante approach focuses on the expected permanent income for individuals with identical circumstances. Hence, the ex-ante approach pays attention to inequalities in expected permanent income between different types of individuals. To demonstrate the empirical relevance of a long-run perspective on EOp, we exploit a unique panel data from Norway on individuals’ incomes over their working lifespan.

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File URL: http://www.ecineq.org/milano/WP/ECINEQ2010-158.pdf
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Bibliographic Info

Paper provided by ECINEQ, Society for the Study of Economic Inequality in its series Working Papers with number 158.

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Length: 29 pages
Date of creation: 2010
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Handle: RePEc:inq:inqwps:ecineq2010-158

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Keywords: equality of opportunity; social welfare; inequality; permanent income; intertemporal choice; ex-ante; ex-post.;

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    by Erik Figueiredo in Moral Hazard on 2010-11-25 18:42:00
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