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

Author

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  • Paul Hufe
  • Ravi Kanbur
  • Andreas Peichl
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.

Suggested Citation

  • Paul Hufe & Ravi Kanbur & Andreas Peichl, 2020. "Measuring Unfair Inequality: Reconciling Equality of Opportunity and Freedom from Poverty," ifo Working Paper Series 323, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    • Handle: RePEc:ces:ifowps:_323
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    References listed on IDEAS

    as
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    1. repec:ces:ifofor:v:19:y:2018:i:2:p:26-34 is not listed on IDEAS
    2. Alexander W Cappelen & Johanna Mollerstrom & Bjørn-Atle Reme & Bertil Tungodden, 2022. "A Meritocratic Origin of Egalitarian Behaviour," The Economic Journal, Royal Economic Society, vol. 132(646), pages 2101-2117.
    3. Daniel Graeber & Viola Hilbert & Johannes König, 2023. "Inequality of Opportunity in Wealth: Levels, Trends, and Drivers," SOEPpapers on Multidisciplinary Panel Data Research 1193, DIW Berlin, The German Socio-Economic Panel (SOEP).
    4. Eric S. M. Protzer, 2019. "Social Mobility Explains Populism, Not Inequality or Culture," CID Working Papers 118a, Center for International Development at Harvard University.
    5. Paul Hufe & Andreas Peichl, 2018. "Inequality and Unfairness in Europe," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 19(02), pages 26-34, July.
    6. Carl Leonard Fischer & Lorenz Meister, 2023. "Economic Determinants of Populism," DIW Roundup: Politik im Fokus 145, DIW Berlin, German Institute for Economic Research.
    7. Bohmann, Sandra & Kalleitner, Fabian, 2023. "Subjective Inequity Aversion: Unfair Inequality, Subjective Well-Being, and Preferences for Redistribution," SocArXiv g8arw, Center for Open Science.
    8. Elisa Aracil & Elena Maria Diaz & Gonzalo Gómez-Bengoechea & Rosalía Mota & David Roch-Dupré, 2024. "Regional Socioeconomic Assessments with a Genetic Algorithm: An Application on Income Inequality Across Municipalities," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 173(2), pages 499-521, June.
    9. Camarero Garcia, Sebastian, 2022. "Inequality of Educational Opportunities and the Role of Learning Intensity," Labour Economics, Elsevier, vol. 74(C).
    10. Andreas Peichl & Marc Stöckli, 2018. "Ungleichheit und Umverteilung in Deutschland: Trends und Handlungsoptionen," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 71(15), pages 18-22, August.
    11. Brunori, Paolo & Hufe, Paul & Mahler, Daniel Gerszon, 2021. "The Roots of Inequality: Estimating Inequality of Opportunity from Regression Trees and Forests," IZA Discussion Papers 14689, Institute of Labor Economics (IZA).
    12. Ji-Won Park & Chae Un Kim, 2020. "Getting to a feasible income equality," Papers 2011.09119, arXiv.org, revised Mar 2021.
    13. Ji-Won Park & Chae Un Kim, 2021. "Getting to a feasible income equality," PLOS ONE, Public Library of Science, vol. 16(3), pages 1-16, March.
    14. Rafael Carranza, 2023. "Upper and Lower Bound Estimates of Inequality of Opportunity: A Cross‐National Comparison for Europe," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 69(4), pages 838-860, December.
    15. Kanbur, Ravi, 2020. "Economic Inequality and Academic Freedom," Working Papers 309988, Cornell University, Department of Applied Economics and Management.
    16. Ji-Won Park & Jaeup U. Kim & Cheol-Min Ghim & Chae Un Kim, 2021. "The Boltzmann fair division for distributive justice," Papers 2109.11917, arXiv.org, revised Nov 2021.
    17. Till van Treeck & Judith Niehues & Galina Kolev & Piotr Pysz & Peter Hampe & Andreas Peichl & Marc Stöckli & Georg Cremer, 2018. "Wie gerecht ist die Welt? – Soziale Ungleichheit und Wirtschaftswachstum," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 71(15), pages 03-25, August.
    18. Luigi Cannari & Giovanni D’Alessio, 2018. "Education, income and wealth: persistence across generations in Italy," Questioni di Economia e Finanza (Occasional Papers) 476, Bank of Italy, Economic Research and International Relations Area.
    19. Thitithep Sitthiyot & Kanyarat Holasut, 2024. "Quantifying fair income distribution in Thailand," Papers 2404.09629, arXiv.org.
    20. Kristoffer Berg & Morten Håvarstein & Magnus E. Stubhaug, 2024. "Meritocratic Labor Income Taxation," CESifo Working Paper Series 11058, CESifo.
    21. Kanbur, Ravi, 2024. "Shannon-Theil-Rawls: Information Theory, Inequality and the Veil of Ignorance," CEPR Discussion Papers 18864, C.E.P.R. Discussion Papers.
    22. Paul Hufe & Andreas Peichl & Daniel Weishaar, 2018. "Intergenerationelle Einkommensmobilität: Schlusslicht Deutschland?," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 71(20), pages 20-28, October.
    23. Erwin Ooghe & Erik Schokkaert & Hannes Serruys, 2023. "Fair Earnings Tax Reforms," CESifo Working Paper Series 10242, CESifo.
    24. Kanbur, Ravi, 2024. "Shannon-Theil-Rawls: Information Theory, Inequality and the Veil of Ignorance," CEPR Discussion Papers 18864, C.E.P.R. Discussion Papers.

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    More about this item

    Keywords

    Inequality; equality of opportunity; poverty; fairness; measurement;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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