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Dynastic inequality, mobility and equality of opportunity

Author

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  • Ravi Kanbur

    () (Cornell University)

  • Joseph E. Stiglitz

    () (Columbia University)

Abstract

Abstract One often heard counter to the concern about rising income and wealth inequality is that it is wrong to focus on inequality of outcomes in a “snapshot”. Intergenerational mobility and “equality of opportunity”, so the argument goes, is what matters for normative evaluation. In response to this counter, we ask what pattern of intergenerational mobility leads to lower inequality not between individuals but between the dynasties to which they belong? And how does this pattern in turn relate to commonly held views on what constitutes equality of opportunity? We revive and revisit here our earlier contributions which were in the form of working papers (Kanbur and Stiglitz 1982, 1986) in order to engage with the current debate. Focusing on bistochastic transition matrices in order to hold constant the steady state snapshot income distribution, we develop an explicit partial ordering which ranks matrices on the criterion of inequality between infinitely lived dynasties. A general interpretation of our result is that when comparing two transition matrices, if one matrix is “further away” from the identity matrix then it will lead to lower dynastic inequality. More specifically, the result presents a computational procedure to check if one matrix dominates another on dynastic inequality. We can also assess “equality of opportunity”, defined as identical prospects irrespective of starting position. We find that this is not necessarily the mobility pattern which minimizes dynastic inequality.

Suggested Citation

  • Ravi Kanbur & Joseph E. Stiglitz, 2016. "Dynastic inequality, mobility and equality of opportunity," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 14(4), pages 419-434, December.
  • Handle: RePEc:kap:jecinq:v:14:y:2016:i:4:d:10.1007_s10888-016-9328-4
    DOI: 10.1007/s10888-016-9328-4
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    References listed on IDEAS

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    1. Aaberge, Rolf & Mogstad, Magne & Peragine, Vito, 2011. "Measuring long-term inequality of opportunity," Journal of Public Economics, Elsevier, vol. 95(3), pages 193-204.
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    3. Miles Corak, 2013. "Income Inequality, Equality of Opportunity, and Intergenerational Mobility," Journal of Economic Perspectives, American Economic Association, vol. 27(3), pages 79-102, Summer.
    4. Dardanoni Valentino, 1993. "Measuring Social Mobility," Journal of Economic Theory, Elsevier, vol. 61(2), pages 372-394, December.
    5. Valentino Dardanoni & Mario Fiorini & Antonio Forcina, 2012. "Stochastic monotonicity in intergenerational mobility tables," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 27(1), pages 85-107, January.
    6. Yoram Amiel & Michele Bernasconi & Frank Cowell & Valentino Dardanoni, 2015. "Do we value mobility?," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 44(2), pages 231-255, February.
    7. A. B. Atkinson, 1981. "On Intergenerational Income Mobility in Britain," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 3(2), pages 194-218, January.
    8. Markandya, Anil, 1984. "The Welfare Measurement of Changes in Economic Mobility," Economica, London School of Economics and Political Science, vol. 51(204), pages 457-471, November.
    9. Dasgupta, Partha & Sen, Amartya & Starrett, David, 1973. "Notes on the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 6(2), pages 180-187, April.
    10. Shorrocks, A F, 1978. "The Measurement of Mobility," Econometrica, Econometric Society, vol. 46(5), pages 1013-1024, September.
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    Citations

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    Cited by:

    1. Stiglitz, Joseph E., 2018. "Pareto efficient taxation and expenditures: Pre- and re-distribution," Journal of Public Economics, Elsevier, vol. 162(C), pages 101-119.
    2. Marcin Waniek & Krzysztof Makarski & Joanna Tyrowicz & Marcin Bielecki, 2017. "Inequality in an OLG Economy with Heterogeneous Cohorts and Pension Systems," 2017 Meeting Papers 958, Society for Economic Dynamics.
    3. Kanbur, Ravi & Snell, Andy, 2017. "Inequality Indices as Tests of Fairness," IZA Discussion Papers 10721, Institute for the Study of Labor (IZA).
    4. Kanbur, Ravi, 2016. "W. Arthur Lewis and the Roots of Ghanaian Economic Policy," CEPR Discussion Papers 11720, C.E.P.R. Discussion Papers.
    5. Kanbur, Ravi, 2016. "Capability, Opportunity, Outcome - - And Equality," Working Papers 250027, Cornell University, Department of Applied Economics and Management.

    More about this item

    Keywords

    Dynastic inequality; Mobility; Equality of opportunity;

    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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