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Where in the world are you? Assessing the importance of circumstance and effort in a world of different mean country incomes and (almost) no migration

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  • Milanovic, Branko

Abstract

Suppose that all people in the world are allocated only two characteristics: country where they live and social class within that country. Assume further that there is no migration. We show that 90 percent of variability in people’s global income position (percentile in world income distribution) is explained by only these two pieces of information. Mean country income (circumstance) explains 60 percent, and social class (both circumstance and effort) 30 percent of global income position. But as at least 1/3 of the latter number is due to circumstance as well, the overall part of circumstance is unlikely to be under 70 percent. On average, “drawing” one-notch higher social class (on a twenty-class scale) is equivalent to living in a twelve-percent richer country. Once people are allocated their social class, it becomes important, not only whether the country they are allocated to is rich or poor, but whether it is egalitarian or not. This is particularly important for the people who “draw” low or high social classes; for the middle classes, income distribution is much less important than mean country income.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 3420.

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Date of creation: 06 Jun 2007
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Handle: RePEc:pra:mprapa:3420

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Keywords: Global inequality; income distribution; migration;

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  1. Bob Sutcliffe, 2004. "World Inequality and Globalization," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 20(1), pages 15-37, Spring.
  2. Checchi, Daniele & Ichino, Andrea & Rustichini, Aldo, 1999. "More equal but less mobile?: Education financing and intergenerational mobility in Italy and in the US," Journal of Public Economics, Elsevier, Elsevier, vol. 74(3), pages 351-393, December.
  3. James B. Davies & Jie Zhang & Jinli Zeng, 2003. "Intergenerational Mobility under Private vs. Public Education," University of Western Ontario, Economic Policy Research Institute Working Papers, University of Western Ontario, Economic Policy Research Institute 20034, University of Western Ontario, Economic Policy Research Institute.
  4. Jo Blanden & Paul Gregg & Lindsey MacMillan, 2007. "Accounting for Intergenerational Income Persistence: Noncognitive Skills, Ability and Education," School of Economics Discussion Papers, School of Economics, University of Surrey 0307, School of Economics, University of Surrey.
  5. Bjorklund, Anders & Jantti, Markus, 1997. "Intergenerational Income Mobility in Sweden Compared to the United States," American Economic Review, American Economic Association, American Economic Association, vol. 87(5), pages 1009-18, December.
  6. Lam, David & Schoeni, Robert F, 1993. "Effects of Family Background on Earnings and Returns to Schooling: Evidence from Brazil," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 101(4), pages 710-40, August.
  7. Kopczuk, Wojciech & Slemrod, Joel & Yitzhaki, Shlomo, 2005. "The limitations of decentralized world redistribution: An optimal taxation approach," European Economic Review, Elsevier, Elsevier, vol. 49(4), pages 1051-1079, May.
  8. Solon, Gary, 1999. "Intergenerational mobility in the labor market," Handbook of Labor Economics, Elsevier, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 29, pages 1761-1800 Elsevier.
  9. Hongyi Li & Lyn Squire & Heng-fu Zou, 1998. "Explaining International and Intertemporal Variations in Income Inequality," CEMA Working Papers, China Economics and Management Academy, Central University of Finance and Economics 73, China Economics and Management Academy, Central University of Finance and Economics.
  10. Borjas, George J., 1999. "The economic analysis of immigration," Handbook of Labor Economics, Elsevier, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 28, pages 1697-1760 Elsevier.
  11. Borjas, George J, 1987. "Self-Selection and the Earnings of Immigrants," American Economic Review, American Economic Association, American Economic Association, vol. 77(4), pages 531-53, September.
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Cited by:
  1. Clemens, Michael A. & Montenegro, Claudio E. & Pritchett, Lant, 2008. "The place premium : wage differences for identical workers across the US border," Policy Research Working Paper Series, The World Bank 4671, The World Bank.
  2. Liberda, Barbara & Peczkowski, Marek, 2011. "Does a change of occupation lead to higher earnings?," MPRA Paper 52532, University Library of Munich, Germany, revised 2011.
  3. Milanovic, Branko & Ersado, Lire, 2010. "Reform and Inequality during the Transition: An Analysis Using Panel Houshold Survey Data, 1990-2006," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) wp2010-62, World Institute for Development Economic Research (UNU-WIDER).
  4. Milanovic, Branko, 2007. "An even higher global inequality than previously thought," MPRA Paper 6676, University Library of Munich, Germany.

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