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Measuring opportunity inequality with monetary transfers

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  • Laurence Kranich

Abstract

In this paper I consider the problem of measuring opportunity inequality when monetary transfers are possible. First, I consider the case in which agents have homogeneous preferences, as in the previous literature, and I then propose an extension to the heterogeneous case. In both, I identify an appropriate egalitarian benchmark relative to which inequality can be measured, and I establish that this yields a theory of measurement analogous to that of income inequality. This overcomes a difficulty recently reported Ok (1997). Finally, I discuss the benchmark notion of equal shadow wealth as a new concept of fairness. The results of the paper are immediately applicable to the measurement of multidimensional economic inequality including economies with indivisible goods.
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  • Laurence Kranich, 2009. "Measuring opportunity inequality with monetary transfers," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 7(4), pages 371-385, December.
    • Handle: RePEc:kap:jecinq:v:7:y:2009:i:4:p:371-385
    DOI: 10.1007/s10888-008-9087-y
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    1. John Weymark, 2003. "Generalized Gini Indices of Equality of Opportunity," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 1(1), pages 5-24, April.
    2. Marc Fleurbaey & François Maniquet, 2006. "Compensation and responsibility," Working Papers halshs-00121367, HAL.
    3. Efe A. Ok & Laurence Kranich, 1998. "The measurement of opportunity inequality: a cardinality-based approach," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 15(2), pages 263-287.
    4. Kranich, Laurence, 1996. "Equitable Opportunities: An Axiomatic Approach," Journal of Economic Theory, Elsevier, vol. 71(1), pages 131-147, October.
    5. Fields, Gary S & Fei, John C H, 1978. "On Inequality Comparisons," Econometrica, Econometric Society, vol. 46(2), pages 303-316, March.
    6. Savaglio, Ernesto & Vannucci, Stefano, 2007. "Filtral preorders and opportunity inequality," Journal of Economic Theory, Elsevier, vol. 132(1), pages 474-492, January.
    7. John E. Roemer & Alain Trannoy, 2013. "Equality of Opportunity," Cowles Foundation Discussion Papers 1921, Cowles Foundation for Research in Economics, Yale University.
    8. Bosmans, Kristof & Lauwers, Luc & Ooghe, Erwin, 2009. "A consistent multidimensional Pigou-Dalton transfer principle," Journal of Economic Theory, Elsevier, vol. 144(3), pages 1358-1371, May.
    9. Roemer, J.E., 1992. "A Pragmatic Theory of Responsibility for the Egalitarian Planner," Papers 391, California Davis - Institute of Governmental Affairs.
    10. Vito Peragine, 2004. "Measuring and implementing equality of opportunity for income," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 22(1), pages 187-210, February.
    11. Ok, Efe A., 1997. "On Opportunity Inequality Measurement," Journal of Economic Theory, Elsevier, vol. 77(2), pages 300-329, December.
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    14. Iturbe-Ormaetxe, Inigo & Nieto, Jorge, 1996. "On Fair Allocations and Monetary Compensations," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 7(1), pages 125-138, January.
    15. repec:bla:jecsur:v:13:y:1999:i:1:p:37-69 is not listed on IDEAS
    16. Vitorocco Peragine, 1999. "The Distribution and Redistribution of Opportunity," Journal of Economic Surveys, Wiley Blackwell, vol. 13(1), pages 37-70, February.
    17. Marc Fleurbaey, 2012. "Three Solutions for the Compensation Problem," World Scientific Book Chapters, in: Equality of Opportunity The Economics of Responsibility, chapter 2, pages 33-51, World Scientific Publishing Co. Pte. Ltd..
    18. Atkinson, Anthony B., 1970. "On the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 2(3), pages 244-263, September.
    19. William Thomson, 2007. "Fair Allocation Rules," RCER Working Papers 539, University of Rochester - Center for Economic Research (RCER).
    20. Thomson, William, 1982. "An informationally efficient equity criterion," Journal of Public Economics, Elsevier, vol. 18(2), pages 243-263, July.
    21. Herrero, Carmen & Iturbe-Ormaetxe, Inigo & Nieto, Jorge, 1998. "Ranking opportunity profiles on the basis of the common opportunities," Mathematical Social Sciences, Elsevier, vol. 35(3), pages 273-289, May.
    22. Dasgupta, Partha & Sen, Amartya & Starrett, David, 1973. "Notes on the measurement of inequality," Journal of Economic Theory, Elsevier, vol. 6(2), pages 180-187, April.
    23. Laurence Kranich, 1996. "Equitable opportunities in economic environments," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 14(1), pages 57-64.
    24. Philippe VAN PARIJS, 1990. "Equal Endowments as Undominated Diversity," Discussion Papers (REL - Recherches Economiques de Louvain) 1990034, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
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    1. John Weymark, 2003. "Generalized Gini Indices of Equality of Opportunity," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 1(1), pages 5-24, April.
    2. Thomson, William, 2011. "Chapter Twenty-One - Fair Allocation Rules," Handbook of Social Choice and Welfare, in: K. J. Arrow & A. K. Sen & K. Suzumura (ed.), Handbook of Social Choice and Welfare, edition 1, volume 2, chapter 21, pages 393-506, Elsevier.
    3. Vito Peragine & Laura Serlenga, 2008. "Higher education and equality of opportunity in Italy," Research on Economic Inequality, in: Inequality and Opportunity: Papers from the Second ECINEQ Society Meeting, pages 67-97, Emerald Group Publishing Limited.
    4. Kranich, Laurence, 2015. "Equal shadow wealth: A new concept of fairness in exchange economies," Mathematical Social Sciences, Elsevier, vol. 76(C), pages 110-117.

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    More about this item

    Keywords

    Equality of opportunity; Inequality measurement; Opportunity sets; D63; D71;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations

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