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Measuring Long-Term Inequality of Opportunity

Rolf Aaberge (), Magne Mogstad () and Vito Peragine ()

No 4714, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: In this paper, we introduce and apply a general framework for evaluating long-term income distributions according to the Equality of Opportunity principle. Our framework allows for both an ex-ante and an ex-post approach to EOp. Our ex-post approach relies on a permanent income measure defined as the minimum annual expenditure an individual would need in order to be as well off as he could be by undertaking inter-period income transfers. There is long-term ex-post inequality of opportunity if individuals who exert the same effort have different permanent incomes. In comparison, the ex-ante approach focuses on the expected permanent income for individuals with identical circumstances. Hence, the ex-ante approach pays attention to inequalities in expected permanent income between different types of individuals. To demonstrate the empirical relevance of a long-run perspective on EOp, we exploit a unique panel data from Norway on individuals' incomes over their working lifespan.

Keywords: permanent income; inequality; social welfare; equality of opportunity; intertemporal choice; ex-ante; ex-post (search for similar items in EconPapers)
JEL-codes: D71 D91 I32 (search for similar items in EconPapers)
Date: 2010-01
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Published in: Journal of Public Economics, 2011, 95 (3-4), 193-204

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Journal Article: Measuring long-term inequality of opportunity (2011) Downloads
Journal Article: Measuring long-term inequality of opportunity (2011) Downloads
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Working Paper: Measuring long-term inequality of opportunity (2010) Downloads
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