Equality of opportunity and optimal effort decision under uncertainty
AbstractWe analyze a society that cares about inequality of opportunity. We propose adynamic setting in which effort is a decision variable that individuals adopt as asolution of an explicit utility maximization program. Effort determines themonetary outcome and it depends on the individual¿s preferences andcircumstances. The planner designs an incentive scheme so as to foster higherincomes, reducing the opportunity cost of effort and productivity for the lessfavoured agents. Income is assumed to be random, and contrary to the generalneutral assumption, we obtain that luck does have a biased and persistent effect onincome distribution that may be regarded as unfair. We also study the planner¿soptimal policy when she cannot infer perfectly the individuals¿ responsibilityfeature.
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Bibliographic InfoPaper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2009-12.
Length: 34 pages
Date of creation: Jan 2009
Date of revision:
Publication status: Published by Ivie
Equality of opportunity; effort decision; policy design; luck;
Find related papers by JEL classification:
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
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