Equality of opportunity and optimal effort decision under uncertainty

Aitor Calo
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Aitor Calo: Universidad de Alicante

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: We analyze a society that cares about inequality of opportunity. We propose adynamic setting in which effort is a decision variable that individuals adopt as asolution of an explicit utility maximization program. Effort determines themonetary outcome and it depends on the individual¿s preferences andcircumstances. The planner designs an incentive scheme so as to foster higherincomes, reducing the opportunity cost of effort and productivity for the lessfavoured agents. Income is assumed to be random, and contrary to the generalneutral assumption, we obtain that luck does have a biased and persistent effect onincome distribution that may be regarded as unfair. We also study the planner¿soptimal policy when she cannot infer perfectly the individuals¿ responsibilityfeature.

Keywords: Equality of opportunity; effort decision; policy design; luck (search for similar items in EconPapers)
JEL-codes: D31 D63 D82 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2009-01
New Economics Papers: this item is included in nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ivi:wpasad:2009-12

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