Measuring Long-Term Inequality of Opportunity

30 Pages Posted: 1 Feb 2010

See all articles by Rolf Aaberge

Rolf Aaberge

Statistics Norway; Institute for the Study of Labor (IZA); Deaprtment of Economics

Magne Mogstad

Statistics Norway; IZA Institute of Labor Economics

Vito Peragine

Università di Bari

Abstract

In this paper, we introduce and apply a general framework for evaluating long-term income distributions according to the Equality of Opportunity principle. Our framework allows for both an ex-ante and an ex-post approach to EOp. Our ex-post approach relies on a permanent income measure defined as the minimum annual expenditure an individual would need in order to be as well off as he could be by undertaking inter-period income transfers. There is long-term ex-post inequality of opportunity if individuals who exert the same effort have different permanent incomes. In comparison, the ex-ante approach focuses on the expected permanent income for individuals with identical circumstances. Hence, the ex-ante approach pays attention to inequalities in expected permanent income between different types of individuals. To demonstrate the empirical relevance of a long-run perspective on EOp, we exploit a unique panel data from Norway on individuals' incomes over their working lifespan.

Keywords: equality of opportunity, social welfare, inequality, permanent income, intertemporal choice, ex-ante, ex-post

JEL Classification: D71, D91, I32

Suggested Citation

Aaberge, Rolf and Mogstad, Magne and Peragine, Vitorocco, Measuring Long-Term Inequality of Opportunity. IZA Discussion Paper No. 4714, Available at SSRN: https://ssrn.com/abstract=1545141

Rolf Aaberge (Contact Author)

Statistics Norway ( email )

N-0033 Oslo
Norway

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Deaprtment of Economics ( email )

Norway

Magne Mogstad

Statistics Norway ( email )

N-0033 Oslo
Norway

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Vitorocco Peragine

Università di Bari ( email )

Piazza Cesare Battisti 1
Bari, Taranto 70121
Italy

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