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The relationship between Inequality of Outcomes and Inequality of Opportunities in a high-inequality country: The case of Chile

  • Javier Núñez Errázuriz
  • Andrea Tartakowsky

Based on the methodology developed by Bourguignon, Melendez and Ferreira (2005) we explore the extent to which income inequality in Chile is associated with inequality of observed exogenous circumstances of origin, which shape individuals “opportunities” to pursue their chosen life plans. We find that equalizing a diverse set of observed circumstances of origin across individuals such as parents’ schooling and employment, household size and composition, ethnic background and features of the municipality of origin reduces the Gini coefficient in about 7-8 percentage points. About half of this effect is transmitted directly on earnings, while the remaining part through its indirect effect on the accumulation of schooling. Further results suggest that the influence of unobserved circumstances on income distribution may be limited, and hence aspects such as preferences, effort, luck, income shocks and income measurement errors may also be important factors behind income inequality, issue that awaits further research.

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File URL: http://www.econ.uchile.cl/uploads/publicacion/0efc3c4f-6437-4bc3-9dbd-0856df16ccaf.pdf
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Paper provided by University of Chile, Department of Economics in its series Working Papers with number wp292.

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Date of creation: Jan 2009
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Handle: RePEc:udc:wpaper:wp292
Contact details of provider: Web page: http://www.econ.uchile.cl/

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  1. Alesina, Alberto & Di Tella, Rafael & MacCulloch, Robert, 2004. "Inequality and happiness: are Europeans and Americans different?," Journal of Public Economics, Elsevier, vol. 88(9-10), pages 2009-2042, August.
  2. Jere R. Behrman & Mark R. Rosenzweig, 2004. "Returns to Birthweight," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 586-601, May.
  3. Javier Núñez E. & Leslie Miranda, 2007. "Recent Findings on Intergenerational Income and Educational Mobility in Chile," Working Papers wp244, University of Chile, Department of Economics.
  4. Bourguignon, François & Ferreira, Francisco & Menéndez, Marta, 2007. "Inequality of Opportunity in Brazil," Economics Papers from University Paris Dauphine 123456789/1552, Paris Dauphine University.
  5. Jaime Ruiz-Tagle, 2007. "Forecasting wage inequality," Estudios de Economia, University of Chile, Department of Economics, vol. 34(2 Year 20), pages 141-162, December.
  6. Javier Núñez & Andrea Tartakowsky, 2007. "Inequality of outcomes vs. inequality of opportunities in a developing country. An exploratory analysis for Chile," Estudios de Economia, University of Chile, Department of Economics, vol. 34(2 Year 20), pages 185-202, December.
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