Arnaud Lefranc

Inequality of Opportunities vs. Inequality of Outcomes: Are Western Societies All Alike?

This paper analyzes the relationship between income inequality and inequality of opportunities for income acquisition in nine developed countries during the nineties. We develop a new definition of equality of opportunity and show how it can be implemented empirically. Equality of opportunity is defined as the situation where income distributions conditional on social origin cannot be ranked according to stochastic dominance criteria. Stochastic dominance is assessed using non-parametric statistical tests. We measure social origin by parental education and occupation and use national household surveys to assess inequality of income and opportunities. USA and Italy show up as the most unequal countries both in terms of outcome and opportunity. At the opposite extreme, income distributions conditional on social origin are very close in Scandinavian countries even before any redistributive policy. The analysis highlights that inequality of outcome and inequality of opportunity can sometimes lead to different pictures. For instance, France and Germany experience a similar level of inequality of income but the former country is much more unequal than the latter from the point of view of equality of opportunity. Differences in rankings according to inequality of outcome and inequality of opportunity underscore the importance of the policymakers choice of the conception of equality to promote.

Chapter 6 Measuring Circumstances: Francs or Ranks, does it Matter?

Purpose – We analyze equality of opportunity for earnings acquisition in France between 1973 and 1993 defining individual circumstances by parental earnings. We compare two different definitions of circumstances. In the first one they are measured by the fathers earnings level, in the second one by the fathers rank in the earnings distribution. Methodology – First we use stochastic dominance tools. Then we decompose the evolution of inequality of opportunity using the mean logarithmic deviation and the results of regressions of descendants’ earnings on their parents’ earnings. Findings – Inequality of opportunity has remained stable when conditioning on the earnings level of the father, whereas it has diminished when conditioning on his rank in the earnings distribution. The former result is explained by the stable intergenerational earnings elasticity. The latter by the decreasing wage inequality in the previous generation. Originality – Our analysis emphasizes that the assessment of equality of opportunity and its evolution is very sensitive to the partition of circumstances used. Moreover, it stresses the complementarity between the discrete and the continuous approaches for measuring inequality of opportunity.