On the welfare loss caused by inequality of opportunity

Based on the ethical principle of equality of opportunity, this paper presents a measure of the welfare loss that is caused by an unfair distribution of a particular outcome (income, health, education, etc). The key idea is that a fair society should produce outcomes that depend on individuals’ effo...

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Bibliographic Details
Published in:Journal of economic inequality 2014-06, Vol.12 (2), p.221-237
Main Authors: Calo-Blanco, Aitor, García-Pérez, J. Ignacio
Format: Article
Language:English
Subjects:
Compensation
Development Economics
Economic Growth
Economics
Economics and Finance
Education
Gender
Human capital
Income distribution
Inequality
International Economics
Opportunity
Political Science
Principles
Public Finance
Society
Socioeconomic factors
Studies
Welfare economics
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Summary:Based on the ethical principle of equality of opportunity, this paper presents a measure of the welfare loss that is caused by an unfair distribution of a particular outcome (income, health, education, etc). The key idea is that a fair society should produce outcomes that depend on individuals’ effort and not on their external circumstances such as gender, socioeconomic background, etc. We propose measuring inequality of opportunity as the welfare loss attributed to the outcome differences among individuals who exert a similar level of effort. Our results are in line with those aspects of fairness literature that give priority to the ex post compensation approach to equality of opportunity. Finally, we present an empirical application for the measurement of the welfare loss in the income distribution in Europe. We have observed a high degree of heterogeneity among European countries. The welfare loss due to inequality of opportunity ranges in those, from basically zero to almost one fifth of their potential welfare.
ISSN:1569-1721
1573-8701
DOI:10.1007/s10888-013-9247-6