Opportunity advantage

Working Paper 2020-516

Abstract

This paper proposes a new approach to the comparison of income distributions based on the notion of opportunity advantage. This is a measure of how likely is that a representative individual of a society gets a higher income than that of another. Opportunity advantage can be regarded as the evaluation of the income opportunities that a society offers to an individual, relative to other societies, from the O`veil of ignoranceO? viewpoint. We show that this notion can be given a precise formalization which results in a complete, transitive and cardinal evaluation of income opportunity. The evaluation so obtained describes the willingness to stay in a society relative to move somewhere else. We provide an empirical application to the analysis of the economic recovery in Spain and its regions. The results show that this criterion offers new insights on the impact of the crisis on households.

Authors: Carmen Herrero, Antonio Villar.