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Measuring Unfair Inequality: Reconciling Equality of Opportunity and Freedom from Poverty

Author

Listed:
  • Hufe, Paul

    () (ZEW Mannheim)

  • Kanbur, Ravi

    () (Cornell University)

  • Peichl, Andreas

    () (Ifo Institute for Economic Research)

Abstract

Rising income inequalities are widely debated in public and academic discourse. In this paper, we contribute to this debate by proposing a new family of measures of unfair inequality. To do so, we acknowledge that inequality is not bad per se, but that its underlying sources need to be taken into account. Thereby, this paper is the first to reconcile two prominent fairness principles, namely equality of opportunity and freedom from poverty, into a joint measure of unfair inequality. Two empirical applications provide important new insights on the development of unfair inequality both over time (in the US) and across countries (in Europe). First, unfair inequality shows different time trends and country rankings compared to total inequality. Second, average unfair inequality doubles when complementing the ideal of an equal opportunity society with poverty aversion. Furthermore, we show that an exclusive focus on top incomes may misguide fairness judgments.

Suggested Citation

  • Hufe, Paul & Kanbur, Ravi & Peichl, Andreas, 2018. "Measuring Unfair Inequality: Reconciling Equality of Opportunity and Freedom from Poverty," IZA Discussion Papers 11601, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp11601
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    References listed on IDEAS

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    1. Fleurbaey,Marc & Maniquet,François, 2011. "A Theory of Fairness and Social Welfare," Cambridge Books, Cambridge University Press, number 9780521715348, August.
    2. Faravelli, Marco, 2007. "How context matters: A survey based experiment on distributive justice," Journal of Public Economics, Elsevier, vol. 91(7-8), pages 1399-1422, August.
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    1. repec:ces:ifofor:v:19:y:2018:i:2:p:26-34 is not listed on IDEAS
    2. repec:ces:ifosdt:v:71:y:2018:i:15:p:18-22 is not listed on IDEAS
    3. repec:ces:ifosdt:v:71:y:2018:i:15:p:03-25 is not listed on IDEAS
    4. repec:ces:ifosdt:v:71:y:2018:i:20:p:20-28 is not listed on IDEAS

    More about this item

    Keywords

    inequality; equality of opportunity; poverty; fairness; measurement;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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