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

Paul Hufe, Ravi Kanbur and Andreas Peichl ()

No 12989, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Rising income inequalities are widely debated in public and academic discourse. In this paper, we contribute to this debate by proposing a new family of measures of unfair inequality. To do so, we acknowledge that inequality is not bad per se, but that its underlying sources need to be taken into account. Thereby, this paper is the first to reconcile two prominent fairness principles, namely equality of opportunity and freedom from poverty, into a joint measure of unfair inequality. Two empirical applications provide important new insights on the development of unfair inequality both over time (in the US) and across countries (in Europe). First, unfair inequality shows different time trends and country rankings compared to total inequality. Second, average unfair inequality doubles when complementing the ideal of an equal opportunity society with poverty aversion. Furthermore, we show that an exclusive focus on top incomes may misguide fairness judgments.

Keywords: Equality of Opportunity; Fairness; inequality; Measurement; poverty (search for similar items in EconPapers)
JEL-codes: D31 D63 I32 (search for similar items in EconPapers)
Date: 2018-06
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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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