Dirk Van de gaer

Equality of opportunity versus equality of opportunity sets

We characterize two different approaches to the idea of equality of opportunity. Roemer’s social ordering is motivated by a concern to compensate for the effects of certain (non-responsibility) factors on outcomes. Van de gaer’s social ordering is concerned with the equalization of the opportunity sets to which people have access. We show how different invariance axioms open the possibility to go beyond the simple additive specification implied by both rules. This offers scope for a broader interpretation of responsibility-sensitive egalitarianism.

Responsibility sensitive egalitarianism and optimal linear income taxation

We compute optimal linear taxes on labor income with quasilinear preferences between income and labor. Agents differ in their productivity and in their taste for leisure. A responsibility sensitive egalitarian wants to compensate for the former differences but not for the latter. This intuition is captured by a social planner that wants to equalize opportunities for subjective utility along the lines of the criteria proposed by Roemer and Van de gaer, and by a social planner evaluating social states based on an advantage function representing reference preferences. Our theoretical results are illustrated with empirical data for Belgium.

Inequality and Growth: From Micro Theory to Macro Empirics

To establish the nature of the link between income distribution and economic growth by means of a standard growth regression, one needs to collapse an entire income distribution into a scalar measure of inequality. Due to data shortages macro-economic research has typically been forced to use the gini coefficient for this purpose. Using a simulation set up we check how well different measures of inequality or poverty succeed in detecting the correct relationship. We find that the gini coefficient might not be the worst of choices, but the comparison of the explanatory power of different inequality measures can help to identify the theoretical mechanism through which inequality affects growth.

Consequences of Specification Error for Distributional Analysis with an Application to Intergenerational Mobility

We analyze the consequences of three types of specification error for conditional distribution functions F (y|a): measurement error in y, measurement error in a and omitted conditioning variables. The paper uses exact results to obtain conditions under which the effect of the misspecification on the computed distribution function can be signed. The effects are shown to depend on both the curvature of the true distribution and the properties of the error distribution. The consequences of misspecification are illustrated using a model of intergenerational mobility.

Approaches to Inequality of Opportunity: Principles, Measures, and Evidence

We put together the different conceptual issues involved in measuring inequality of opportunity, discuss how these concepts have been translated into computable measures, and point out the problems and choices researchers face when implementing these measures. Our analysis identifies and suggests several new possibilities to measure inequality of opportunity. The relevance of the conceptual issues and modelling choices are illustrated with findings from the empirical literature on income inequality of opportunity.

Boycotts, Power Politics, or Trust Building: How to Prevent Conflict?

In a game of imperfect information, the paper analyzes whether different types of intervention by third parties can ensure that political (ethnic, religious, social, . . . ) groups within a country will pursue a cooperative strategy and how easy it is to predict their effects. We conclude that a strong boycott is the most effective instrument, then comes a weak boycott, followed by power politics. Finally, apart from requiring very detailed information on the relevant parameters of the economy, the use of confidence building measures has a serious flaw: it is incapable of averting civil war.

Lorenz dominance and non-welfaristic redistribution

Our concern is for income inequalities that may result from non-welfaristic redistribution schemes. We show that for large classes of income functions Lorenz dominance results can be found in the comparison of two egalitarian equivalent mechanisms. Comparisons of different conditionally egalitarian mechanisms only yield poverty dominance results. In general, no egalitarian equivalent mechanism can be Lorenz dominated by a conditionally egalitarian mechanism. Our analysis stresses the need for accurate empirical estimates of the pre-tax income function and of the distributions of responsibility and compensation characteristics.

Upward structural mobility, exchange mobility, and subgroup consistent mobility measurement: U.S.-German mobility rankings revisited

We formalize the concept of upward structural mobility and use the framework of subgroup consistent mobility measurement to derive a relative and an absolute measure of mobility that is increasing in upward structural mobility and compatible with the notion of exchange mobility. In our empirical illustration, we contribute substantively to the ongoing debate about mobility rankings between the U.S. and Germany by demonstrating that the U.S. typically does exhibit more upward structural mobility than Germany.

Inequality Adjusted Income Growth

We introduce and characterize a new measure of aggregate income growth that allows us to give more weight to individuals with lower individual income growth. Our measure includes several important measures of directional mobility encountered in the literature. The empirical application compares the measure of income growth between the USA and Germany, and finds that giving more weight to individuals with lower income growth reverses the ranking.

Statistical inference for two measures of inequality when incomes are correlated

This paper derives the asymptotic normality of the distribution of difference in the Atkinson/Kolm and generalised entropy inequality measures when incomes are correlated. We illustrate the procedure by calculating the difference in inequality before and after tax in Ireland. Our empirical results suggest that the positive correlation between incomes before and after taxes substantially reduces the variance of the estimated difference in equality.