Abstract

The main goal of this paper is to document and analyze the long-term evolution of inequality of opportunity and thus extend the recent empirical literature, which is mainly concerned with its measurement at a specific point in time. Using repeated cross-section surveys for five European countries (France, Germany, Great Britain, Italy, and Switzerland), the evolution of inequality of opportunity is measured for a period of about two decades for the whole populations, as well as for different birth cohorts. Relative inequality of opportunity represents an important portion of total income inequality, with values ranging from 30 to 50 percent according to the standard deviation of logs (and reaching a lower share in case of mean log deviation) and, for all the countries, it shows a stable or declining time trend. When the birth cohorts are followed across time, inequality of opportunity decreases with age: the effect of circumstances seems to weaken over the life cycle. This is a quite different age profile from that of inequality of outcomes (income or consumption), which generally increases with age. A decomposition of the relative inequality of opportunity allows highlighting some key drivers of its time evolution. In all the countries, there has been a clear enhancement of equality of educational opportunity (as captured by a downward trending intergenerational education persistence) and a reduction of the returns to education. However, for some countries, notably Italy, these trends have failed to translate into decreasing inequality of opportunity in the income distribution because of the increasing role of parental networking (an additional channel through which parental background affects the incomes of offspring).

Highlights

  • The recent empirical literature on equality of opportunity (EOp) has provided a significant body of evidence on the extent of inequality of opportunity in different countries

  • We report two sets of estimates: a) The first set contains the analysis by year/survey and reports the estimated values of four different variables: relative inequality of opportunity, return to education (β), parental network (γ) and the intergenerational persistence in education (η); b) The second set contains the same variables calculated at different ages and for different birth cohorts

  • As for the age profiles, the results show a clear declining pattern in the value of relative inequality of opportunity, which is associated with an inverted U-shaped trend of the return to education and a flat pattern of both intergenerational persistence of education and parental networking

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Summary

Introduction

The recent empirical literature on equality of opportunity (EOp) has provided a significant body of evidence on the extent of inequality of opportunity in different countries. While analysis (ii) requires the availability of a rich longitudinal data set containing information of individual incomes and circumstances over the entire life cycle of the individuals, the analyses (i) and (iii) can be potentially carried out by using repeated cross-section surveys, are much less data intensive. This is the reason why in the present paper we focus on analyses (i) and (iii). See Aaberge et al (2011) for an analysis of long-term inequality of opportunity along the lines of concept (ii)

Canonical models of inequality of opportunity
Our empirical model
The data
The results
United Kingdom
Switzerland
Summing up
Findings
Concluding remarks
Full Text
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