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On the welfare loss caused by inequality of opportunity

  • Aitor Calo Blanco

    ()

    (Dpto. de Analisis Económico y Admon. de Empresas, Universidad de La Coruña)

  • J. Ignacio García Pérez

    ()

    (Department of Economics, Universidad Pablo de Olavide)

Based on the ethical principle of equality of opportunity, this paper presents a measure of the welfare loss that is caused by an unfair distribution of a particular outcome (income, health, education, etc). The key idea is that a fair society should produce outcomes that depend on individuals’ effort and not on their external circumstances such as gender, socioeconomic background, etc. We propose measuring inequality of opportunity as the welfare loss attributed to the outcome differences among individuals who exert a similar level of effort. Our results are in line with those aspects of fairness literature that give priority to the ex post compensation approach to equality of opportunity. Finally, we present an empirical application for the measurement of the welfare loss in the income distribution in Europe. We have observed a high degree of heterogeneity among European countries. The welfare loss due to inequality of opportunity ranges in those, from basically zero to almost one fifth of their potential welfare.

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File URL: http://www.upo.es/serv/bib/wps/econ1212.pdf
File Function: First version, 2012
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Paper provided by Universidad Pablo de Olavide, Department of Economics in its series Working Papers with number 12.12.

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Length: 30 pages
Date of creation: Dec 2012
Date of revision:
Handle: RePEc:pab:wpaper:12.12
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  1. Villar Antonio, 2005. "On the Welfare Evaluation of Income and Opportunity," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 5(1), pages 1-21, June.
  2. Alessandra Fogli & Raquel Fernandez, 2009. "Culture: An Empirical Investigation of Beliefs, Work, and Fertility," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(1), pages 146-77, January.
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  7. John E. Roemer & Rolf Aaberge & Ugo Colombino & Johan Fritzell & Stephen P. Jenkins & Ive Marx & Marianne Page & Evert Pommer & Javier Ruiz-Castillo & Maria Jesus San Segundo & Torben Tranaes & Gert G, 2000. "To What Extent do Fiscal Regimes Equalize Opportunities for Income Acquisition Among Citizens?," Discussion Papers of DIW Berlin 222, DIW Berlin, German Institute for Economic Research.
  8. Daniele Checchi & Vito Peragine, 2010. "Inequality of opportunity in Italy," Journal of Economic Inequality, Springer, vol. 8(4), pages 429-450, December.
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  10. Sen, Amartya, 1973. "On Economic Inequality," OUP Catalogue, Oxford University Press, number 9780198281931, March.
  11. Shorrocks, Anthony F, 1984. "Inequality Decomposition by Population Subgroups," Econometrica, Econometric Society, vol. 52(6), pages 1369-85, November.
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  26. Nicolas Pistolesi, 2009. "Inequality of opportunity in the land of opportunities, 1968–2001," Journal of Economic Inequality, Springer, vol. 7(4), pages 411-433, December.
  27. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
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  29. Victor R. Fuchs, 1975. "A Note on Sex Segregation in Professional Occupations," NBER Chapters, in: Explorations in Economic Research, Volume 2, number 1, pages 105-111 National Bureau of Economic Research, Inc.
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