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Lower and Upper Bounds of Unfair Inequality: Theory and Evidence for Germany and the US

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  • Judith Niehues
  • Andreas Peichl

Abstract

Previous estimates of unfair inequality of opportunity (IOp) are only lower bounds because of the unobservability of the full set of endowed circumstances beyond the sphere of individual responsibility. In this paper, we suggest a new estimator based on a fixed effects panel model which additionally allows identifying an upper bound. We illustrate our approach by comparing Germany and the US based on harmonized micro data. We find significant and robust differences between lower and upper bound estimates - both for gross and net earnings based either on periodical or permanent income - for both countries. We discuss the cross-country differences and similarities in IOp in the light of differences in social mobility and persistence.

Suggested Citation

  • Judith Niehues & Andreas Peichl, 2011. "Lower and Upper Bounds of Unfair Inequality: Theory and Evidence for Germany and the US," SOEPpapers on Multidisciplinary Panel Data Research 395, DIW Berlin, The German Socio-Economic Panel (SOEP).
    • Handle: RePEc:diw:diwsop:diw_sp395
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    Cited by:

    1. Erwin Ooghe & Andreas Peichl, 2015. "Fair and Efficient Taxation under Partial Control," Economic Journal, Royal Economic Society, vol. 125(589), pages 2024-2051, December.
    2. Zbigniew Mogila & Patricia C. Melo & José M. Gaspar, 2022. "Estimating labour‐income‐based inequality of opportunity for a selection of EU‐SILC countries: National and urban–rural perspectives," Regional Science Policy & Practice, Wiley Blackwell, vol. 14(5), pages 1158-1187, October.
    3. José María Rentería, 2023. "Inequality of Educational Opportunity and Time-Varying Circumstances: Longitudinal Evidence from Peru," Journal of Development Studies, Taylor & Francis Journals, vol. 59(2), pages 258-278, February.
    4. Alberto Alesina & Stefanie Stantcheva & Edoardo Teso, 2018. "Intergenerational Mobility and Preferences for Redistribution," American Economic Review, American Economic Association, vol. 108(2), pages 521-554, February.
    5. Karin Hederos & Markus Jäntti & Lena Lindahl, 2017. "Gender and inequality of opportunity in Sweden," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 49(3), pages 605-635, December.

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    More about this item

    Keywords

    Equality of opportunity; fairness; redistribution; wage inequality;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion

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