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Measuring Long-Term Inequality of Opportunity

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  • Aaberge, Rolf

    ()
    (Statistics Norway)

  • Mogstad, Magne

    ()
    (University of Chicago)

  • Peragine, Vito

    ()
    (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 ex-ante 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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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4714.

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Length: 30 pages
Date of creation: Jan 2010
Date of revision:
Publication status: published in: Journal of Public Economics, 2011, 95 (3-4), 193-204
Handle: RePEc:iza:izadps:dp4714

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

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