Inequality when effort matters

Martin Ravallion

No 367, Working Papers from ECINEQ, Society for the Study of Economic Inequality

Abstract: It is sometimes argued that poorer people choose to work less, implying less welfare inequality than suggested by observed incomes. Social policies have also acknowledged that efforts differ, and that people respond to incentives. Prevailing measures of inequality (in outcomes or opportunities) do not, however, measure incomes consistently with personal choices of effort. The direction of bias is unclear given the heterogeneity in efforts and preferences. Data on the labor supplies of single American adults suggest that adjusting for effort imposing common preferences attenuates inequality, although the effect is small. Allowing for preference heterogeneity consistently with behavior suggests higher inequality.

Keywords: income; welfare; inequality; poverty; effort; labor supply. (search for similar items in EconPapers)
JEL-codes: D31 D63 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2015-07
New Economics Papers: this item is included in nep-ger, nep-lma and nep-ltv
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Inequality when Effort Matters (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:inq:inqwps:ecineq2015-367

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