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The Evolution of Inequality of Opportunity in Europe

Working Paper 2023-644

Abstract

This paper analyses the effect of inherited individual circumstances such as gender, family background, birth location on individual earnings in Europe. By using three waves of the EU Statistics on Income and Living Conditions (2005, 2011, 2019) we study the extent, the evolution, and the sources of inequality of opportunity in labour income in 27 European countries. We provide both country-specific estimates and a novel, pan-European analysis, in which the European Union is treated as a single entity and the country of birth is used as additional individual circumstance. The cross-country analysis reveals that on average about 40 per cent of earnings inequality is explained by pre-determined circumstances, although the data reveal some degree of heterogeneity, both in terms of levels and trends. Gender and parental education emerge as the most relevant circumstances in most countries. Pan-European inequality of opportunity, estimated through a multilevel model, appears much higher than any other country specific estimates: in the last wave about 60 per cent of total earnings inequality is explained by circumstances, although there has been a clear decreasing trend in the last 15 years, showing a sharp process of convergence within Europe.

Authors: Stefano Filauro, Flaviana Palmisano, Vito Peragine.

Keywords: inequality, equality of opportunity, earnings, labour market, Europe
JEL: D31, D63, J31, O15