IDEAS home Printed from https://ideas.repec.org/p/aia/ginidp/34.html
   My bibliography  Save this paper

GINI DP 34: Bounds of Unfair Inequality of Opportunity: Theory and Evidence for Germany and the US

Author

Listed:
  • Niehues, J. (Judith)
  • Andreas Peichl

    (Institute for the Study of Labor (IZA))

Abstract

Previous estimates of inequality of opportunity (IOp) are lower bounds because of the unobservability of the full set of endowed characteristics beyond the sphere of individual responsibility. Knowing the true size of unfair IOp, however, is important for the acceptance of (some) inequality and the design of redistributive policies as underestimating the true amount of IOp might lead to too little redistribution. This paper is the first to suggest an upper bound estimator. We illustrate our approach by comparing Germany and the US based on harmonized micro data. We find significant, sizeable and robust differences between lower and upper bound estimates – both for gross and net earnings based on either periodical or permanent income – for both countries. We discuss the cross-country differences and (surprising) similarities in IOp in the light of differences in social mobility and persistence. JEL Codes: D63, H2, J62, J7

Suggested Citation

  • Niehues, J. (Judith) & Andreas Peichl, 2012. "GINI DP 34: Bounds of Unfair Inequality of Opportunity: Theory and Evidence for Germany and the US," GINI Discussion Papers 34, AIAS, Amsterdam Institute for Advanced Labour Studies.
  • Handle: RePEc:aia:ginidp:34
    as

    Download full text from publisher

    File URL: https://www1.feb.uva.nl/aias/DP34-Nieheus,Peichl.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Björklund, Anders & Roine, Jesper & Waldenström, Daniel, 2012. "Intergenerational top income mobility in Sweden: Capitalist dynasties in the land of equal opportunity?," Journal of Public Economics, Elsevier, vol. 96(5), pages 474-484.
    2. Shorrocks, A F, 1980. "The Class of Additively Decomposable Inequality Measures," Econometrica, Econometric Society, vol. 48(3), pages 613-625, April.
    3. Dolls, Mathias & Fuest, Clemens & Peichl, Andreas, 2012. "Automatic stabilizers and economic crisis: US vs. Europe," Journal of Public Economics, Elsevier, vol. 96(3), pages 279-294.
    4. Checchi, Daniele & Peragine, Vito & Serlenga, Laura, 2010. "Fair and Unfair Income Inequalities in Europe," IZA Discussion Papers 5025, Institute of Labor Economics (IZA).
    5. Thomas Piketty, 1995. "Social Mobility and Redistributive Politics," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(3), pages 551-584.
    6. Francisco H. G. Ferreira & Jérémie Gignoux, 2011. "The Measurement Of Inequality Of Opportunity: Theory And An Application To Latin America," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 57(4), pages 622-657, December.
    7. Nicolas Pistolesi, 2009. "Inequality of opportunity in the land of opportunities, 1968–2001," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 7(4), pages 411-433, December.
    8. Peichl, Andreas & Schneider, Hilmar & Siegloch, Sebastian, 2010. "Documentation IZA?MOD: The IZA Policy SImulation MODel," IZA Discussion Papers 4865, Institute of Labor Economics (IZA).
    9. Aaberge, Rolf & Mogstad, Magne & Peragine, Vito, 2011. "Measuring long-term inequality of opportunity," Journal of Public Economics, Elsevier, vol. 95(3), pages 193-204.
    10. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2008. "Trends in U.S. Wage Inequality: Revising the Revisionists," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 300-323, May.
    11. Ooghe, Erwin & Peichl, Andreas, 2010. "Fair and Efficient Taxation under Partial Control: Theory and Evidence," IZA Discussion Papers 5388, Institute of Labor Economics (IZA).
    12. Blackburn, McKinley L., 2007. "Estimating wage differentials without logarithms," Labour Economics, Elsevier, vol. 14(1), pages 73-98, January.
    13. Almås, Ingvild & Cappelen, Alexander W. & Lind, Jo Thori & Sørensen, Erik Ø. & Tungodden, Bertil, 2011. "Measuring unfair (in)equality," Journal of Public Economics, Elsevier, vol. 95(7-8), pages 488-499, August.
    14. Daniele Checchi & Vito Peragine, 2010. "Inequality of opportunity in Italy," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 8(4), pages 429-450, December.
    15. Marc Fleurbaey & Vito Peragine, 2013. "Ex Ante Versus Ex Post Equality of Opportunity," Economica, London School of Economics and Political Science, vol. 80(317), pages 118-130, January.
    16. Lefranc, Arnaud & Pistolesi, Nicolas & Trannoy, Alain, 2009. "Equality of opportunity and luck: Definitions and testable conditions, with an application to income in France," Journal of Public Economics, Elsevier, vol. 93(11-12), pages 1189-1207, December.
    17. Thomas Piketty & Emmanuel Saez, 2007. "How Progressive is the U.S. Federal Tax System? A Historical and International Perspective," Journal of Economic Perspectives, American Economic Association, vol. 21(1), pages 3-24, Winter.
    18. Alberto Alesina & George-Marios Angeletos, 2005. "Fairness and Redistribution," American Economic Review, American Economic Association, vol. 95(4), pages 960-980, September.
    19. repec:dau:papers:123456789/1552 is not listed on IDEAS
    20. Roemer, John E. & Aaberge, Rolf & Colombino, Ugo & Fritzell, Johan & Jenkins, Stephen P. & Lefranc, Arnaud & Marx, Ive & Page, Marianne & Pommer, Evert & Ruiz-Castillo, Javier, 2003. "To what extent do fiscal regimes equalize opportunities for income acquisition among citizens?," Journal of Public Economics, Elsevier, vol. 87(3-4), pages 539-565, March.
    21. Björklund, Anders & Jäntti, Markus & Lindquist, Matthew J., 2009. "Family background and income during the rise of the welfare state: Brother correlations in income for Swedish men born 1932-1968," Journal of Public Economics, Elsevier, vol. 93(5-6), pages 671-680, June.
    22. Rolf Aaberge & Ugo Colombino, 2012. "Accounting for family background when designing optimal income taxes: a microeconometric simulation analysis," Journal of Population Economics, Springer;European Society for Population Economics, vol. 25(2), pages 741-761, January.
    23. Christian Dustmann & Johannes Ludsteck & Uta Schönberg, 2009. "Revisiting the German Wage Structure," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(2), pages 843-881.
    24. Roemer, John E. & Aaberge, Rolf & Colombino, Ugo & Fritzell, Johan & Jenkins, Stephen P. & Lefranc, Arnaud & Marx, Ive & Page, Marianne & Pommer, Evert & Ruiz-Castillo, Javier, 2003. "To what extent do fiscal regimes equalize opportunities for income acquisition among citizens?," Journal of Public Economics, Elsevier, vol. 87(3-4), pages 539-565, March.
    25. Francisco H.G. Ferreira & Jérémie Gignoux, 2011. "The Measurement of Inequality of Inequality of Opportunity: Theory and an Application to Latin America," Post-Print halshs-00754503, HAL.
    26. repec:bla:econom:v:71:y:2004:i:281:p:223-239 is not listed on IDEAS
    27. Miles Corak & Andrew Heisz, 1999. "The Intergenerational Earnings and Income Mobility of Canadian Men: Evidence from Longitudinal Income Tax Data," Journal of Human Resources, University of Wisconsin Press, vol. 34(3), pages 504-533.
    28. Katz, Lawrence F. & Autor, David H., 1999. "Changes in the wage structure and earnings inequality," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 26, pages 1463-1555, Elsevier.
    29. Fleurbaey, Marc, 2012. "Fairness, Responsibility, and Welfare," OUP Catalogue, Oxford University Press, number 9780199653591, Decembrie.
    30. François Bourguignon & Francisco H. G. Ferreira & Marta Menéndez, 2007. "Inequality Of Opportunity In Brazil," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 53(4), pages 585-618, December.
    31. Arnaud Lefranc & Nicolas Pistolesi & Alain Trannoy, 2008. "Inequality Of Opportunities Vs. Inequality Of Outcomes: Are Western Societies All Alike?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 54(4), pages 513-546, December.
    32. Dunnzlaff, Lina & Neumann, Dirk & Niehues, Judith & Peichl, Andreas, 2010. "Equality of Opportunity and Redistribution in Europe," IZA Discussion Papers 5375, Institute of Labor Economics (IZA).
    33. Fong, Christina, 2001. "Social preferences, self-interest, and the demand for redistribution," Journal of Public Economics, Elsevier, vol. 82(2), pages 225-246, November.
    34. James E. Foster & Efe A. Ok, 1999. "Lorenz Dominance and the Variance of Logarithms," Econometrica, Econometric Society, vol. 67(4), pages 901-908, July.
    35. Marc Fleurbaey, 2012. "Three Solutions for the Compensation Problem," World Scientific Book Chapters, in: Equality of Opportunity The Economics of Responsibility, chapter 2, pages 33-51, World Scientific Publishing Co. Pte. Ltd..
    36. Gert G. Wagner & Joachim R. Frick & Jürgen Schupp, 2007. "The German Socio-Economic Panel Study (SOEP) – Scope, Evolution and Enhancements," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 127(1), pages 139-169.
    37. Dale T. Mortensen & Bent Jesper Christensen & Jesper Bagger, 2010. "Wage and Productivity Dispersion: Labor Quality or Rent Sharing?," 2010 Meeting Papers 758, Society for Economic Dynamics.
    38. Kurt Devooght, 2008. "To Each the Same and to Each his Own: A Proposal to Measure Responsibility‐Sensitive Income Inequality," Economica, London School of Economics and Political Science, vol. 75(298), pages 280-295, May.
    39. VAN KERM Philippe, 2003. "What Lies Behind Income Mobility? Reranking and Distributional Change in Belgium, Western Germany and the USA," IRISS Working Paper Series 2003-03, IRISS at CEPS/INSTEAD.
    40. Foster, James E. & Shneyerov, Artyom A., 2000. "Path Independent Inequality Measures," Journal of Economic Theory, Elsevier, vol. 91(2), pages 199-222, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Judith Niehues & Andreas Peichl, 2012. "Bounds of Unfair Inequality of Opportunity: Theory and Evidence for Germany and the US," CESifo Working Paper Series 3815, CESifo.
    2. Judith Niehues & Andreas Peichl, 2014. "Upper bounds of inequality of opportunity: theory and evidence for Germany and the US," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 43(1), pages 73-99, June.
    3. Niehues, Judith & Peichl, Andreas, 2011. "Lower and Upper Bounds of Unfair Inequality: Theory and Evidence for Germany and the US," IZA Discussion Papers 5834, Institute of Labor Economics (IZA).
    4. X. Ramos & D. Van De Gaer, 2012. "Empirical Approaches to Inequality of Opportunity: Principles, Measures, and Evidence," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 12/792, Ghent University, Faculty of Economics and Business Administration.
    5. Andreas Peichl & Martin Ungerer, 2016. "Accounting for the spouse when measuring inequality of opportunity," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 47(3), pages 607-631, October.
    6. John E. Roemer & Alain Trannoy, 2016. "Equality of Opportunity: Theory and Measurement," Journal of Economic Literature, American Economic Association, vol. 54(4), pages 1288-1332, December.
    7. Vito Peragine & Federico Biagi, 2019. "Equality of opportunity: theory, measurement and policy implications," JRC Research Reports JRC118542, Joint Research Centre.
    8. Ferreira, Francisco H. G. & Peragine, Vito, 2015. "Equality of Opportunity: Theory and Evidence," IZA Discussion Papers 8994, Institute of Labor Economics (IZA).
    9. Aitor Calo-Blanco & J. García-Pérez, 2014. "On the welfare loss caused by inequality of opportunity," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 12(2), pages 221-237, June.
    10. ANDREOLI Francesco & HAVNES Tarjei & LEFRANC Arnaud, 2014. "Equalization of opportunity: Definitions, implementable conditions and application to early-childhood policy evaluation," LISER Working Paper Series 2014-12, Luxembourg Institute of Socio-Economic Research (LISER).
    11. John E. Roemer & Alain Trannoy, 2013. "Equality of Opportunity," Cowles Foundation Discussion Papers 1921, Cowles Foundation for Research in Economics, Yale University.
    12. Ana Suárez Álvarez & Ana Jesús López Menéndez, 2018. "Assessing Changes Over Time in Inequality of Opportunity: The Case of Spain," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 139(3), pages 989-1014, October.
    13. Pilar García‐Gómez & Erik Schokkaert & Tom Van Ourti & Teresa Bago d'Uva, 2015. "Inequity in the Face of Death," Health Economics, John Wiley & Sons, Ltd., vol. 24(10), pages 1348-1367, October.
    14. Vito Peragine & Flaviana Palmisano & Paolo Brunori, 2014. "Economic Growth and Equality of Opportunity," The World Bank Economic Review, World Bank, vol. 28(2), pages 247-281.
    15. Marc Fleurbaey & Vito Peragine & Xavier Ramos, 2017. "Ex post inequality of opportunity comparisons," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 49(3), pages 577-603, December.
    16. Juan C. Palomino & Gustavo A. Marrero & Juan G. Rodríguez, 2019. "Channels of Inequality of Opportunity: The Role of Education and Occupation in Europe," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 143(3), pages 1045-1074, June.
    17. Francesco Andreoli & Arnaud Lefranc, 2013. "Equalization of opportunity: Definitions and implementable conditions," Working Papers 310, ECINEQ, Society for the Study of Economic Inequality.
    18. Ana Suárez Álvarez & Ana Jesús López Menéndez, 2016. "Inequality of opportunity and income inequality in Spain: An analysis over time," Working Papers 423, ECINEQ, Society for the Study of Economic Inequality.
    19. Marc Fleurbaey & Vito Peragine, 2013. "Ex Ante Versus Ex Post Equality of Opportunity," Economica, London School of Economics and Political Science, vol. 80(317), pages 118-130, January.
    20. Paolo Brunori & Francisco H. G. Ferreira & Vito Peragine, 2013. "Inequality of Opportunity, Income Inequality, and Economic Mobility: Some International Comparisons," Palgrave Macmillan Books, in: Eva Paus (ed.), Getting Development Right, chapter 0, pages 85-115, Palgrave Macmillan.

    More about this item

    Keywords

    Equality of Opportunity; Earnings Inequality; Mobility; Circumstances; Family Background; Redistribution;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • J7 - Labor and Demographic Economics - - Labor Discrimination

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aia:ginidp:34. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiemer Salverda (email available below). General contact details of provider: https://edirc.repec.org/data/aiuvanl.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.