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GINI DP 34: Bounds of Unfair Inequality of Opportunity: Theory and Evidence for Germany and the US

Author

Listed:
  • Niehues, J. (Judith)
  • Andreas Peichl

    (Institute for the Study of Labor (IZA))

Abstract

Previous estimates of inequality of opportunity (IOp) are lower bounds because of the unobservability of the full set of endowed characteristics beyond the sphere of individual responsibility. Knowing the true size of unfair IOp, however, is important for the acceptance of (some) inequality and the design of redistributive policies as underestimating the true amount of IOp might lead to too little redistribution. This paper is the first to suggest an upper bound estimator. We illustrate our approach by comparing Germany and the US based on harmonized micro data. We find significant, sizeable and robust differences between lower and upper bound estimates – both for gross and net earnings based on either periodical or permanent income – for both countries. We discuss the cross-country differences and (surprising) similarities in IOp in the light of differences in social mobility and persistence. JEL Codes: D63, H2, J62, J7

Suggested Citation

  • Niehues, J. (Judith) & Andreas Peichl, 2012. "GINI DP 34: Bounds of Unfair Inequality of Opportunity: Theory and Evidence for Germany and the US," GINI Discussion Papers 34, AIAS, Amsterdam Institute for Advanced Labour Studies.
    • Handle: RePEc:aia:ginidp:34
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    More about this item

    Keywords

    Equality of Opportunity; Earnings Inequality; Mobility; Circumstances; Family Background; Redistribution;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • J7 - Labor and Demographic Economics - - Labor Discrimination

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