An Ex-Post View of Inequality of Opportunity in France and its Regions

This paper proposes an ex-post measure of inequality of opportunity in France and its regions by assessing the inequality between individuals exerting the same effort. To this end, we define a fair income that fulfils ex-post equality of opportunity requirements. Unfairness is measured by an unfair Gini based on the distance between the actual income and the fair income. Our findings reveal that the measures of ex-post inequality of opportunity largely vary across regions, and that this is due to differences in reward schemes and in the impact of the non responsibility factors of income. We find that most regions have actual incomes closer to fair incomes than to average income, excepted Ile de France where the actual income looks poorly related to effort variables. Finally, we find that income inequality and inequality of opportunity are positively correlated among regions.     

Equality of opportunity and the distribution of long-run income in Sweden

Equality of opportunity is an ethical goal with almost universal appeal. The interpretation taken here is that a society has achieved equality of opportunity if it is the case that what individuals accomplish, with respect to some desirable objective, is determined wholly by their choices and personal effort, rather than by circumstances beyond their control. We use data for Swedish men born between 1955 and 1967 for whom we measure the distribution of long-run income, as well as several important background circumstances, such as parental education and income, family structure and own IQ before adulthood. We address the question: in Sweden, given its present constellation of social policies and institutions, to what extent is existing income inequality due to circumstances, as opposed to ‘effort’? Our results suggest that several circumstances, importantly both parental income and own IQ, are important for long-run income inequality, but that variations in individual effort account for the most part of that inequality.     

The measurement of opportunity inequality: a cardinality-based approach

We consider the problem of ranking distributions of opportunity sets on the basis of equality. First, conditional on a given ranking of individual opportunity sets, we define the notion of an equalizing transformation. Then, assuming that the opportunity sets are ranked according to the cardinality ordering, we formulate the analogues of the notions of the Lorenz partial ordering, equalizing (Dalton) transfers, and inequality averse social welfare functions – concepts which play a central role in the literature on income inequality. Our main result is a cardinality-based analogue of the fundamental theorem of inequality measurement: one distribution Lorenz dominates another if and only if the former can be obtained from the latter by a finite sequence of rank preserving equalizations, and if and only if the former is ranked higher than the latter by all inequality averse social welfare functions. In addition, we characterize the smallest monotonic and transitive extension of our cardinality-based Lorenz inequality ordering. Received: 2 May 1995 / Accepted: 11 October 1996     

Ranking Income Distributions According to Equality of Opportunity

According to the opportunity egalitarian ethics, economic inequalities due to factors beyond the individual responsibility are inequitable and to be compensated by society, whereas inequalities due to personal responsibility are equitable and not to be compensated. In this paper we derive welfare and inequality criteria that respect this principle of justice. We characterize axiomatically classes of opportunity egalitarian social evaluation functions. Then, by requiring unanimous agreement among such classes, we provide simple distributional conditions to rank income distributions. These criteria extend the Lorenz and generalized Lorenz partial orderings, commonly used in the unidimensional case of income distributions, to the current context of equality of opportunity.     

Dynastic inequality,mobility and equality of opportunity

One often heard counter to the concern about rising income and wealth inequality is that it is wrong to focus on inequality of outcomes in a “snapshot”. Intergenerational mobility and “equality of opportunity”, so the argument goes, is what matters for normative evaluation. In response to this counter, we ask what pattern of intergenerational mobility leads to lower inequality not between individuals but between the dynasties to which they belong? And how does this pattern in turn relate to commonly held views on what constitutes equality of opportunity? We revive and revisit here our earlier contributions which were in the form of working papers (Kanbur and Stiglitz 1982, 1986) in order to engage with the current debate. Focusing on bistochastic transition matrices in order to hold constant the steady state snapshot income distribution, we develop an explicit partial ordering which ranks matrices on the criterion of inequality between infinitely lived dynasties. A general interpretation of our result is that when comparing two transition matrices, if one matrix is “further away” from the identity matrix then it will lead to lower dynastic inequality. More specifically, the result presents a computational procedure to check if one matrix dominates another on dynastic inequality. We can also assess “equality of opportunity”, defined as identical prospects irrespective of starting position. We find that this is not necessarily the mobility pattern which minimizes dynastic inequality.     

Measuring and implementing equality of opportunity for income

Departing from the welfarist tradition, recent theories of justice focus on individual opportunities as the appropriate standard for distributive judgments. To explore how this philosophical conception can be translated into concrete public policy, we select the income as relevant outcome and the income tax as the relevant redistributive policy, and we address the following questions: (i) what is the degree of opportunity inequality in an income distribution? (ii) how to design an opportunity egalitarian income tax policy? Several criteria for ranking income distributions on the basis of equality of opportunities are derived. Moreover, we characterize an opportunity egalitarian income tax and we formulate criteria for choosing among alternative tax schedules. I would like to thank Peter Lambert for his encouragement and guidance, and Walter Bossert, Maurice Salles, and partecipants at the 1998 Social Choice and Welfare Conference, Vancouver, and at the Conference on Non–Welfaristic Issues in Normative Economics in Caen for their helpful comments and suggestions. Financial support of the Ministero dellIstruzione, Università e Ricerca (Italy) is gratefully acknowledged. Responsibility for any remaining deficiency is mine.     

Income Inequality,Globalization, and the Welfare State: Evidence from 23 Industrial Countries, 1990–2009

The debate regarding the welfare state–weakening effect and the income inequality‐increasing effect of globalization remains a contentious issue among stratification scholars. For some, globalization increases income inequality, while for others, globalization has no, or a negligible, effect on income inequality. This study brings new evidence to bear on this debate by separately investigating effects of multiple indicators of globalization (international trade, foreign direct investment [FDI] and immigration), and of welfare state generosity (government social‐protection spending) on (1) income inequality before taxes and transfers and (2) income inequality after taxes and transfers, using data from 23 Organisation for Economic Co‐operation and Development (OECD) countries over 1990–2009. First, results show a positive effect of international trade, a negative effect of immigration, but no effect of FDI and government social‐protection spending on income inequality before taxes and transfers. Second, results show no effect of the globalization indicators but a negative effect of government social‐protection spending on income inequality after taxes and transfers. These findings suggest that (1) globalization has inequality‐increasing effects depending on measures of income inequality; (2) the welfare state, in many OECD countries, continues to shape income distribution; and (3) in contrast with the popular narrative, immigration may decrease income inequality.     

The sensitivity of income polarization

This study looks at polarization and its components’ sensitivity to assumptions about equivalence scales, income definition, ethical income distribution parameters, and the income accounting period. A representative sample of Danish individual incomes from 1984 to 2002 is utilised. Results show that polarization has increased over time, regardless of the applied measure, when the last part of the period is compared to the first part of the period; primary causes being increased inequality (alienation) and faster income growth among high incomes relative to those in the middle of the distribution. Increasing the accounting period confirms the reduction in inequality found for shorter periods, but polarization is virtually unchanged, because income group identification increases. Applying different equivalence scales does not change polarization ranking for different years, but identification ranks are affected. The welfare state considerably reduces income polarization and inequality, but at the expense of some more identification.      

The effects of income inequality and income level on mortality vary by population size in Texas counties

OBJECTIVES: This study uses the counties of Texas to empirically test the predictions of Wilkinson's theory on the role of income and inequality in explaining health differentials in populations. Wilkinson predicts (1) that health is affected more by income inequality than average income in areas with large population, and (2) that health is affected more by average income than income inequality in areas with small population. We investigate how large the population of a unit must be for income inequality within the unit to affect mortality. METHODS: Measures of income inequality were computed from the 1990 U.S. census data and mortality was computed from Vital Statistics data. Poisson regressions estimated the age-adjusted relative risk of the top quintile relative to the bottom quintile for equality and for income among selections of Texas counties based on population size. County ethnic composition, educational level, and health care access were controlled for. RESULTS: Among counties with populations greater than 150,000, the risk of death was lower in counties with more equal income distribution than in counties with less equal income distribution. Among counties with population less than 150,000, median income affected relative risk in counties with less than 30 percent Hispanics, but not in those with more than 30 percent Hispanics. CONCLUSIONS: This study provides some support for the predictions of Wilkinson's theory.     

THE DYNAMICS OF ETHNIC INEQUALITIES: The Case of Israel

Three alternative trends of ethnic or racial inequality are formulated: diminishing inequality, rising inequality and stabilizing inequality. The last trend is hypothesized to hold for industrial ‘welfare states’ which lack both blatant discrimination against ethnic groups and systematic efforts to close the ethnic gaps.

A comprehensive study of inequalities in income, occupation, education and power between Oriental (non-European) and Ashkenazi (European) Jews in Israel has shown that the thesis of ‘stabilizing inequality’ fits Israel best. The various areas of Oriental-Ashkenazi inequality are conducive to conflict not only because of their persistence, but also for being appreciable and discrepant. It is concluded that more radical means are needed if greater ethnic equality is desired.     

The Relational Production of Workplace Equality: The Case of Worker-Recuperated Businesses in Argentina

Work organizations are commonly studied as sites that produce and reproduce inequality. But we know much less about how organizations promote equality. This article examines efforts to broaden access to power, opportunity, and resources in Hotel Bauen, a worker-recuperated business that was converted from a privately-owned company into a worker-run cooperative. Drawing on extensive ethnographic and archival research, I analyze efforts to redesign and redefine work through collective decision-making, job rotation, and pay equity. The article concludes by identifying three mechanisms of equality—inclusion, opportunity distribution, and symbolic leveling—to theorize the relational production of workplace equality and complement the near-exclusive focus on inequality and its effects.

     

NOT ALL BANKS ARE EQUAL: COOPERATIVE BANKING AND INCOME INEQUALITY

This paper studies the role of different types of credit institutions in income inequality. By analyzing Italian local (provincial) credit markets over the 2001–2011 period, we find that cooperative banks mitigate income inequality in local communities more than their commercial counterparts. The results also suggest that it is the specific nature and orientation of cooperative banks, more than their relationship lending technologies, that improve income distribution. The impact of cooperative banking on inequality appears however to be partly channeled by a reduced dynamism of local economies, especially lower migratory flows and business turnover. (JEL G21, G38, O15)     

EVALUATING CHANGES IN THE DISTRIBUTION OF CAPITAL WEALTH

A small-scale general equilibrium model in which the distribution of capital wealth is a key parameter is employed to examine the potential economic consequences of greater capital wealth equality. Every performance indicator examined – aggregate income, consumption equality, social welfare in the sum-of-utilities sense, and aggregate saving –is improved by greater capital wealth equality. However, the bottom-line social welfare gain, relative to the present high-inequality situation – even from the maximum achievable level of complete equality in capital wealth distribution – would be numerically rather modest.     

Non-anonymous growth incidence curves, income mobility and social welfare dominance

The distributional incidence of growth is generally analyzed by comparing the quantiles of the pre- and post-growth income distribution—e.g. the so-called Growth Incidence Curves. Such an approach based on an implicit re-ranking of individual incomes ignores income mobility by assuming that only post-growth income matters in social welfare. By contrast, this paper takes the view that “status quo matters” and that social welfare should logically be defined on both inital and terminal income. This leads to consider ’non-anonymous’ Growth Incidence Curves that plot income growth rates against the various quantiles of the initial distribution. Dominance criteria that generalize those available for standard growth incidence curves are derived, which account for the inequality of individual income changes, conditional on initial income. An application to the cross-country distributional feature of global growth illustrates the analysis.     

Generalized Gini Indices of Equality of Opportunity

This article considers the ranking of profiles of opportunity sets on the basis of their equality. A version of the Pigou–Dalton transfer principle that is appropriate for the measurement of opportunity inequality is introduced and used to axiomatize the class of generalized Gini equality of opportunity orderings. A characterization of the class of generalized Gini social preference orderings for opportunity profiles is also provided.     

The Effect of Family Background on Individual Wages and an Examination of Inequality of Opportunity in India

The paper attempts to explore the role of family background in contributing to the overall economic inequality in Indian society. Drawing on the recent work on equality of opportunity, and using the Indian Human Development Survey (IHDS, 2004–05), paper finds that the opportunity share of inequality in wage earnings in India ranges from 11% to 17% across different age based cohorts. Given the conservative view of what constitutes responsibility, the analysis is likely to identify only the lower bound of opportunity inequality. The paper also calls for redistributive policies favoring those who suffer from inferior circumstances.     

Partial equality-of-opportunity orderings

This paper proposes a partial equality-of-opportunity ordering based on the inequality-of-opportunity curve, a mechanism that gives preference to those who are worse off in terms of opportunity. Moreover, it provides a complete ordering that depends on a sensitivity parameter representing the degree of priority in the equality-of-opportunity policy. The Moreno-Ternero approach is obtained as a particular case. This proposal is applied to a set of 12 countries to compare their degree of equality of opportunity. Results show the relevance for economic policy of observing inequality of opportunity over tranches. Denmark dominates, in terms of post-tax income, all other economies in our sample. This paper was written during my visit to the Department of Political Science at Yale University. I am very grateful for the hospitality and helpful comments of John Roemer. I also acknowledge useful comments and suggestions by Juan D. Moreno-Ternero, the audiences at XIV EEP (Santander) and ECINEQ2007 (Berlin) and two anonymous referees. This paper has benefited from the support of the Spanish Ministry of Science and Technology [Project#SEC2003-08397], Fundación BBVA and Instituto de Estudios Fiscales. The usual disclaimer applies.     

Income Inequality and Chronic Health Conditions: A Multilevel Analysis of the U.S. States

Recently, scholarly work has examined the effect of rising income inequality on health outcomes. However, this work is somewhat inconclusive. The mechanisms that could produce such an association are still being sorted out. Much of this work focuses on mortality outcomes with little attention to how this process operates for actual health conditions, including chronic health problems—arguably the main public health concerns of the developed world. In a series of multilevel binary logistic regression models using data from the 2005 and 2007 Behavioral Risk Factor Surveillance System, we examine the association between state-level income inequality, poverty, and social welfare measures on spending and policy to examine the association between these factors for three chronic health outcomes: diabetes, hypertension, and coronary heart disease. We find that income inequality is conditionally positively related only to the diagnosis of diabetes and hypertension, and only in 2007. However, absolute poverty is related to the outcome across all three dependent variables. Certain social welfare measures attenuate the effects of both income inequality and absolute poverty, suggesting that some policies reduce this association.     

Punishment,inequality, and welfare: a public good experiment

This paper reports the results of an experiment that investigates the two-sided relationship between punishment and welfare. First, it contributes to the literature on the behavioral determinants of punishment by examining the role of relative income and income comparisons as a determinant of punishment in a two-stage public good game when inequality arises endogenously from the subjects’ behavior. Second, this paper investigates the impact of punishment on both absolute and relative incomes. We compare three treatments of our game. The Unequal Cost treatment replicates Fehr and Gächter (2000)’s experiment under a stranger matching protocol. The Equal Cost treatment is identical to the previous one except that the ratio between the cost of one punishment point to the punisher and its cost to the target equals one. The third treatment is similar to the second one except that a partner matching protocol is implemented in order to isolate strategic motives for punishment. Our results indicate that subjects punish even when they cannot alter the current distribution of payoffs. We also find that in all treatments, the intensity of punishment increases in the level of inter-individual inequality. Finally, despite its cost, punishment progressively improves welfare in association with a decrease in the aggregate level of inequality over time.     

Judgment of distributional inequality in networks

Why is income inequality perceived and judged differently across a society? Following the social comparison theory, one reasonable explanation suggests that individuals are exposed to different local reference groups in social networks. We design a vignette experiment to study how income distributions are judged by individuals structured in networks. The experiment shows that perceptions of distributional inequality are high when network ties are unequally distributed across individuals, suggesting that network inequality contributes to distributional inequality. Beyond the network effect, inequality judgment is found to be driven by a mix of self-interest and other-regarding preference: people are in favor of group-beneficial income distributions wherein they rank high, but not extremely high, in the group. It shows that people care about not only their relative affluence, but also where others stand in the distribution.