Measuring opportunity inequality with monetary transfers

Abstract

In this paper I consider the problem of measuring opportunity inequality when monetary transfers are possible. First, I consider the case in which agents have common evaluations (or identical preferences), as in the previous literature. I then propose an extension to the heterogeneous case. In both cases I identify an appropriate egalitarian benchmark relative to which inequality can be mea- sured, and I establish that this yields a theory of measurement analogous to that of income inequality. Consequently, the introduction of money (or an infinitely divisible commodity) avoids the difficulty reported in Ok (J Econ Theory 77:300- 329, 1997). The results of the paper are immediately applicable to the measurement of multidimensional economic inequality including economies with indivisible goods.