Kuznets and Gatsby at the Crossroad of Inequality of Opportunity: New Evidence From European Regions

This article contributes to the literature about inequality of opportunity (IOp) by providing an original decomposition of income inequality in its circumstance-driven and choice-driven components in sub-national Europe, starting from the EU-SILC data. In fact, sub-national heterogeneities in the socioeconomic structure are a typical peculiarity of European countries, where stark differences in terms of socioeconomics structure, development, interpersonal gaps emerge at the local level (e.g., Italy). Consequently, country-level estimates of IOp may overlook these sub-national heterogeneities, despite being extremely relevant to its formation. Moreover, this paper tests two additional hypotheses starting from the obtained IOp estimates. First, it investigates the association between inequality of opportunity and income inequality (IGGC), in the same fashion of intergenerational mobility in the case of the Great Gatsby Curve. A positive nexus emerges. Second it studies the relationship between inequality of opportunity and the local development level (IKC), in the same fashion of income inequality in the case of the Kuznets Curve. An inverse U-shaped association is found. Finally, while the inequality estimates show some susceptibility to overfitting issues, models specification, income definition, inequality measures, the IGGC and the IKC are robust to all the sensitivity checks.