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Measuring Unfair Inequality: Reconciling Equality of Opportunity and Freedom from Poverty

Paul Hufe, Ravi Kanbur and Andreas Peichl ()

No 323, ifo Working Paper Series from ifo Institute - Leibniz Institute for Economic Research at the University of Munich

Abstract: Empirical evidence on distributional preferences shows that people do not judge inequality as problematic per se but that they take the underlying sources of income differences into account. In contrast to this evidence, current measures of inequality do not adequately reflect these normative preferences. In this paper, we address this shortcoming by developing a new measure of unfair inequality that reconciles two idely-held fairness principles: equality of opportunity and freedom from poverty. We provide two empirical applications of our measure. First, we analyze the development of inequality in the US from 1969 to 2014 from a normative perspective. Second, we conduct a corresponding international comparison between the US and 31 European countries in 2010. Our results document increasing unfairness in the US over time. This trend is driven by a strong decrease in social mobility that puts the “land of opportunity” among the most unfair countries in 2010.

Keywords: Inequality; equality of opportunity; poverty; fairness; measurement (search for similar items in EconPapers)
JEL-codes: D31 D63 I32 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-eur
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Related works:
Working Paper: Measuring Unfair Inequality: Reconciling Equality of Opportunity and Freedom from Poverty (2018) Downloads
Working Paper: Measuring unfair inequality: Reconciling equality of opportunity and freedom from poverty (2018) Downloads
Working Paper: Measuring Unfair Inequality: Reconciling Equality of Opportunity and Freedom from Poverty (2018) Downloads
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