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The Impact of Redistribution of Opportunities on Income Inequality: A CGE Approach

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  • Haqiqi, Iman
  • Mortazavi Kakhaki, Morteza

Abstract

The allocation of opportunities affects income distribution and income inequality. This paper analyzes the economic impacts of the initial allocation of resources and redistribution of opportunities. In this study, we apply a computable general equilibrium (CGE) model focusing on the distribution of opportunities and allocation of available resources. The differences between households' income are caused by differences in labor income (skilled and unskilled) and the household's income from capital stock. The model is calibrated based on the micro consistent matrix (MCM) of the Iranian economy. We found that the redistribution of opportunities and re-allocation of resources can reduce inequality. In other words, improvement inequality of opportunities leads to more equal society. The important finding of the study is that an increase in inequality of opportunity may cause the income gap grows faster. So, big reduction in inequality of income after a small reduction in inequality of opportunities can be witnessed.

Suggested Citation

  • Haqiqi, Iman & Mortazavi Kakhaki, Morteza, 2012. "The Impact of Redistribution of Opportunities on Income Inequality: A CGE Approach," MPRA Paper 95819, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:95819
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    References listed on IDEAS

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    1. Weymark, John A., 1981. "Generalized gini inequality indices," Mathematical Social Sciences, Elsevier, vol. 1(4), pages 409-430, August.
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    4. Ok, Efe A., 1997. "On Opportunity Inequality Measurement," Journal of Economic Theory, Elsevier, vol. 77(2), pages 300-329, December.
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    6. Javier Núñez & Andrea Tartakowsky, 2007. "Inequality of outcomes vs. inequality of opportunities in a developing country. An exploratory analysis for Chile," Estudios de Economia, University of Chile, Department of Economics, vol. 34(2 Year 20), pages 185-202, December.
    7. Thomas F. Rutherford & D. Sigrist, 2010. "What if? Policy analysis with calibrated equilibrium models," CEPE Working paper series 10-72, CEPE Center for Energy Policy and Economics, ETH Zurich.
    8. Böhringer, Christoph & Rutherford, Thomos F., 2009. "Integrated assessment of energy policies: Decomposing top-down and bottom-up," Journal of Economic Dynamics and Control, Elsevier, vol. 33(9), pages 1648-1661, September.
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    1. Haqiqi, Iman & Bahalou, Marziyeh & Shamsaee, Arezoo, 2017. "An Economic General Equilibrium Model for Evaluation of Production Support Policies in Developing Countries," MPRA Paper 95865, University Library of Munich, Germany.
    2. Haqiqi, Iman & Yasharel, Sepideh, 2018. "Removing Fossil Fuel Subsidies to Help the Poor," MPRA Paper 95907, University Library of Munich, Germany.
    3. Aghababaei, Mohammad Ebrahim, 2019. "General Equilibrium Resource Elasticity in an Open Resource-Abundant Economy," MPRA Paper 97851, University Library of Munich, Germany.
    4. Mortazavi Kakhaki, Morteza & Haqiqi, Iman & Mahdavi Adeli, Mohammad, 2013. "Regional Equality of Opportunities and Income: A General Equilibrium Modeling for Iran," MPRA Paper 95822, University Library of Munich, Germany.
    5. Bahalou, Marziyeh & Haqiqi, Iman, 2016. "A General Equilibrium Model with Labor-Leisure and Domestic-Abroad Choice for Assessment of Labor Migration in a Small Open Economy," MPRA Paper 95863, University Library of Munich, Germany.
    6. Haqiqi, Iman & Bahalou, Marziyeh & Hamidi, Razieh, 2014. "Measurement and Evaluation of Equality of Opportunity: A Numerical Look at Education, Health, and Income Inequality," MPRA Paper 95866, University Library of Munich, Germany.
    7. Haqiqi, Iman & Mirian, Narges, 2015. "A Financial General Equilibrium Model for Assessment of Financial Sector Policies in Developing Countries," MPRA Paper 95841, University Library of Munich, Germany.

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    More about this item

    Keywords

    Justice; equality; general equilibrium; access to public services; equality of endowments; Dworkin;
    All these keywords.

    JEL classification:

    • B31 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals - - - Individuals
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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