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Opportunity advantage: a new approach to comparing income distributions

Author

Listed:
  • Carmen Herrero

    (University of Alicante)

  • Antonio Villar

    (Pablo de Olavide University)

Abstract

This paper proposes a new approach to the comparison of income distributions based on the notion of opportunity advantage. This is a measure of how likely is that a representative individual of a society gets a higher income than that of another. Opportunity advantage can be regarded as the evaluation of the income opportunities that a society offers to an individual, relative to other societies, from the O`veil of ignoranceO? viewpoint. We show that this notion can be given a precise formalization which results in a complete, transitive and cardinal evaluation of income opportunity. The evaluation so obtained describes the willingness to stay in a society relative to move somewhere else. We provide an empirical application to the analysis of the economic recovery in Spain and its regions. The results show that this criterion offers new insights on the impact of the crisis on households.

Suggested Citation

  • Carmen Herrero & Antonio Villar, 2020. "Opportunity advantage: a new approach to comparing income distributions," Working Papers 516, ECINEQ, Society for the Study of Economic Inequality.
    • Handle: RePEc:inq:inqwps:ecineq2020-516
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    References listed on IDEAS

    as
    1. Carmen Herrero & Antonio Villar, 2013. "On the Comparison of Group Performance with Categorical Data," PLOS ONE, Public Library of Science, vol. 8(12), pages 1-7, December.
    2. repec:bla:econom:v:50:y:1983:i:197:p:3-17 is not listed on IDEAS
    3. Vito Peragine, 2004. "Measuring and implementing equality of opportunity for income," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 22(1), pages 187-210, February.
    4. 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.
    5. Mike Brewer & Cormac O'Dea, 2012. "Measuring living standards with income and consumption: evidence from the UK," IFS Working Papers W12/12, Institute for Fiscal Studies.
    6. Joan Esteban & Carlos Gradín & Debraj Ray, 2007. "An Extension of a Measure of Polarization, with an application to the income distribution of five OECD countries," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 5(1), pages 1-19, April.
    7. Rothschild, Michael & Stiglitz, Joseph E., 1973. "Some further results on the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 6(2), pages 188-204, April.
    8. Angus Deaton & Salman Zaidi, 2002. "Guidelines for Constructing Consumption Aggregates for Welfare Analysis," World Bank Publications, The World Bank, number 14101, April.
    9. Dirk Krueger & Fabrizio Perri, 2006. "Does Income Inequality Lead to Consumption Inequality? Evidence and Theory -super-1," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 73(1), pages 163-193.
    10. 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.
    11. Carmen Herrero & Antonio Villar, 2018. "The Balanced Worth: A Procedure to Evaluate Performance in Terms of Ordered Attributes," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 140(3), pages 1279-1300, December.
    12. Dasgupta, Partha & Sen, Amartya & Starrett, David, 1973. "Notes on the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 6(2), pages 180-187, April.
    13. Sen, Amartya, 1973. "On Economic Inequality," OUP Catalogue, Oxford University Press, number 9780198281931.
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