Does high income inequality signify inequality of opportunities?

Navon, David and Cohen, Yoav (2013): Does high income inequality signify inequality of opportunities?

Abstract

It is often presumed that Gini coefficient values taken to reflect high income inequality are largely due to some combination of socioeconomic factors that gives rise to inequality of opportunities. We demonstrate, using computer simulations, that practically every Gini value within the entire range observed in state economies can be approximated by at least one of a set of possible models of an economy in which earning is totally due to random factors. Although that clearly does not prove that opportunities are in reality fairly equal, it does suggest that inequality of opportunities is not necessary for high income inequality. At the least, it relegates the burden of proof to whoever ascribes the latter largely to the former.

• Item Type: MPRA Paper
• Language: English
• Keywords: Gini, Lorenz, income inequality, inequality of opportunities
• Subjects: D - Microeconomics > D3 - Distribution > D31 - Personal Income, Wealth, and Their Distributions; D - Microeconomics > D6 - Welfare Economics > D63 - Equity, Justice, Inequality, and Other Normative Criteria and Measurement; I - Health, Education, and Welfare > I3 - Welfare, Well-Being, and Poverty; I - Health, Education, and Welfare > I3 - Welfare, Well-Being, and Poverty > I32 - Measurement and Analysis of Poverty; P - Economic Systems > P1 - Capitalist Systems; Y - Miscellaneous Categories > Y1 - Data: Tables and Charts

References

Bauman, Z. (2009). Living on borrowed time: Conversations with Citlali Rovirosa-Madrazo. Cambridge: Polity.

Björklund, A., & Jäntti, M. (2009). Intergenerational income mobility andthe role of family background. In W. Salverda, B., Nolan, & T.M.Smeeding (Eds), The Oxford Handbook of Economic Inequality (pp 491-521). Oxford: Oxford University Press.

Cowell, F.A. (2000). Measuring inequality (3rd ed). Oxford: OxfordUniversity Press.

Dalton, H. (1920). The measurement of the inequality of incomes.Economic Journal, 30, .

Epstein, J.M., & Axtell, R. (1996). Growing artificial societies: Social science from the bottom up. Washington, D.C.: The Brookings Institution Press.

Jenkins, S.P., & van Kerm, P. (2009). The measurement of economic inequality. In W. Salverda, B., Nolan, & T.M. Smeeding (Eds), The Oxford Handbook of Economic Inequality (pp 40-67). Oxford: Oxford University Press.

Lebergott, S. Are the rich getting richer? Trend in U.S. wealth concentration? The Journal of Economic History, 36, 147-162.

Krugman, P. (2006). Graduates vs Oligarchs. New York Times, February 27.

Marx, K. (1965/1867). Capital: A critical analysis of capitalist production (Vol 1). Moscow: Progress publishers. (Originally published as Das kapital: Kritik der politischen Oekonomie. Hamburg: Verlag 07 von Otto Meissner).

Piketty, T., & Saez, E. (2003) Income inequality in the United States, 1913-1998, Quarterly journal of economics, 118, n° 1 .

Piketty, T., & Saez, E. (2006). The evolution of top incomes: A historical and international perspectives, American Economic Review, 96, n° 2, .

Schnitzer, M. (1974). Income distribution: A comparative study of the United States, Sweden, West Germany, East Germany, the United Kindom, and Japan. New York: Praeger. Sen, A. T. (1997/1973). On economic inequality. Oxford: Clarendon Press. (originally published in 1973).

Sen, A. (1997). From income inequality to economic inequality. Southern Economic Journal, 64, .

Tomes, N. (1981). The family, inheritance, and the intergenerational transmission of inequality. The Journal of Political Economy, 89, 928-958.