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Equality of opportunity, moral hazard and the timing of luck

Author

Listed:
  • Arnaud Lefranc

    (University of Cergy-Pontoise, THEMA and IZA)

  • Alain Trannoy

    () (Aix-Marseille University(Aix-Marseille School of Economics), CNRS and EHESS)

Abstract

Abstract Equality of opportunity is usually defined as a situation where the effect of circumstances on outcome is nullified (compensation principle) and effort is rewarded (reward principle). We propose a new version of the reward principle based on the idea that effort deserves reward for it is costly. We show that luck can be introduced in two ways in the definition of these principles, depending on whether the correlation between luck and circumstances should be nullified and whether the correlation between luck and effort should be rewarded. In this regard, the timing of luck with respect to effort decisions is crucial, as is exemplified by moral hazard where effort choice influences the lottery of future uncertain events.

Suggested Citation

  • Arnaud Lefranc & Alain Trannoy, 2017. "Equality of opportunity, moral hazard and the timing of luck," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 49(3), pages 469-497, December.
  • Handle: RePEc:spr:sochwe:v:49:y:2017:i:3:d:10.1007_s00355-017-1054-8
    DOI: 10.1007/s00355-017-1054-8
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    References listed on IDEAS

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    Cited by:

    1. Aizawa, Toshiaki, 2019. "Ex-ante Inequality of Opportunity in Child Malnutrition: New Evidence from Ten Developing Countries in Asia," Economics & Human Biology, Elsevier, vol. 35(C), pages 144-161.
    2. Francesco Andreoli & Tarjei Havnes & Arnaud Lefranc, 2019. "Robust Inequality of Opportunity Comparisons: Theory and Application to Early Childhood Policy Evaluation," The Review of Economics and Statistics, MIT Press, vol. 101(2), pages 355-369, May.
    3. Davillas, A.; & Jones, A.M.;, 2018. "Ex ante inequality of opportunity in health,Decomposition and distributional analysis of biomarkers," Health, Econometrics and Data Group (HEDG) Working Papers 18/30, HEDG, c/o Department of Economics, University of York.
    4. Carrieri, V.; & Davillas, A.; & Jones, A.M.;, 2019. "A latent class approach to inequity in health using biomarker data," Health, Econometrics and Data Group (HEDG) Working Papers 19/22, HEDG, c/o Department of Economics, University of York.

    More about this item

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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