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

Abstract

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 father's earnings level, in the second one by the father's 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.