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Social Choice and Welfare

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30-10-2017 | Original Paper

Ex post inequality of opportunity comparisons

Published in: Social Choice and Welfare | Issue 3-4/2017

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Abstract

In this paper we propose different criteria to rank income distributions according to equality of opportunity. Different from existing ones, our criteria explicitly recognize the interplay between circumstances and effort. We characterize them axiomatically and we compare them with existing criteria; then we propose some scalar measures. We show that our ex post criteria are mostly obtained from “seemingly” ex ante properties. In the second part of the paper we apply our new criteria to measuring inequality of opportunity in Germany. We illustrate our ex-post inequality of opportunity approach based on classes by means of the German Socio-Economic Panel (SOEP) for the first decade of the 2000s.

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Here we refer to partial orderings and dominance conditions, but of course indices and complete orderings are also possible and have been defined in the literature.

See the discussion in Björklund et al. (2012).

This is consistent with the ex post approach. Inequalities in luck, considered after random factors have struck, are most naturally considered to be part of the circumstances. See LeFranc et al. (2008) for a different model in which luck is treated as a third argument and is not compensated.

Full observability is not the case in most empirical applications, and this can have different implications for ex ante vs. ex post approaches—see the discussions in Ferreira and Gignoux (2011), Niehues and Peichl (2014) or Ferreira and Peragine (2016).

An agnostic (non-utilitarian) version of the ex ante equality of opportunity criterion would be the following: For all \(X,Y\in D,X\succeq Y\) if and only if \(\sum _{i=1}^{k}X_{i}\geqslant \sum _{i=1}^{k}Y_{i}\) \(\forall k=1,\ldots ,n\).

Notice that the rankings in definitions 1 and 2 coincide respectively to the rankings (1) and (2) if \(X,Y\in D^{>}.\)

Let us briefly explain why. In what we call Roemer’s approach, within a type, effort is measured by the percentile in the distribution of income. This means that income is automatically increasing in effort in every type. A class may mix several types, but the monotonic relationship between effort and income in each of these types is preserved when the class “jumps” from one type to another.

One might consider a “non-anonymous” variant defined by \(\sum _{i=1}^{k}X_{i}^{>}\succeq _{GL}\sum _{i=1}^{k}Y_{i}^{>}\), but it would be hard to justify, since the generalized Lorenz relation is by definition indifferent to permutations, in contradiction with the “non-anonymous” approach. We do not know how this variant could be characterized.

See Bourguignon et al. (2007) for a parametric version of this approach.

For details, see Wagner et al. (2007).

We have used the consumer price index to deflate labor incomes.

Now we can compare individuals located at the same position of the conditional effort distribution, and no two individuals will have the same degree of effort, as this is defined as percentiles of the conditional effort distribution.

See Brunori et al. (2016) for a discussion of the drawbacks of using the Mean Log Deviation in the measurement of inequality of opportunity.

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Title: Ex post inequality of opportunity comparisons
Publication date: 30-10-2017
Published in: Social Choice and Welfare / Issue 3-4/2017
Print ISSN: 0176-1714
Electronic ISSN: 1432-217X
DOI: https://doi.org/10.1007/s00355-017-1090-4

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