The relationship between Inequality of Outcomes and Inequality of Opportunities in a high-inequality country: The case of Chile
AbstractBased on the methodology developed by Bourguignon, Melendez and Ferreira (2005) we explore the extent to which income inequality in Chile is associated with inequality of observed exogenous circumstances of origin, which shape individuals “opportunities” to pursue their chosen life plans. We find that equalizing a diverse set of observed circumstances of origin across individuals such as parents’ schooling and employment, household size and composition, ethnic background and features of the municipality of origin reduces the Gini coefficient in about 7-8 percentage points. About half of this effect is transmitted directly on earnings, while the remaining part through its indirect effect on the accumulation of schooling. Further results suggest that the influence of unobserved circumstances on income distribution may be limited, and hence aspects such as preferences, effort, luck, income shocks and income measurement errors may also be important factors behind income inequality, issue that awaits further research.
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Bibliographic InfoPaper provided by University of Chile, Department of Economics in its series Working Papers with number wp292.
Date of creation: Jan 2009
Date of revision:
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
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