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Intertemporal inequality of opportunity

Working Paper 2020-554

Abstract

We propose an axiomatic approach to characterize normative criteria for the evaluation of lifetime income distributions according to the opportunity egalitarian perspective (Roemer, 1998). In a setting in which both individual incomes and predetermined circumstances are variable over time, we adopt a norm-based approach to the measurement of inequality, and propose two different benchmark distributions, referring respectively to the ex ante and the ex post versions of equality of opportunity. We first aggregate over time, thereby characterizing measures of intertemporal individual inequalityof opportunity, and then aggregate the individual measures into a societal measure. Our individual measure results to be a weighted average of individuals’ opportunity gap experienced in each period. Our aggregate measure is an average of a concave transformation of the individual intertemporal opportunity gap and can be interpreted as an intertemporal inequality of opportunity index. We apply our framework to evaluate the Korean distribution of income from an intertemporal and opportunity egalitarian perspective.

Authors: Domenico Moramarco, Flaviana Palmisano, Vito Peragine.

Keywords: lifetime income inequality, intertemporal distributions, equality of opportunity, opportunity gap, Korea.
JEL: D31, D63, I32, J62.