On the welfare loss caused by inequality of opportunity

Aitor Calo Blanco () and J. Ignacio García Pérez ()
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Aitor Calo Blanco: Dpto. de Analisis Económico y Admon. de Empresas, Universidad de La Coruña

No 12.12, Working Papers from Universidad Pablo de Olavide, Department of Economics

Abstract: 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.

Keywords: equality of opportunity; income distribution; ex post compensation; welfare loss. (search for similar items in EconPapers)
JEL-codes: D31 D63 J71 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2012-12
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http://www.upo.es/serv/bib/wps/econ1212.pdf First version, 2012 (application/pdf)

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Journal Article: On the welfare loss caused by inequality of opportunity (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:pab:wpaper:12.12

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