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Fairness and Gini decomposition

Working Paper 2023-650

Abstract

We propose a new decomposition of the Gini coefficient inspired by the opportunity egalitarian paradigm. Under the assumption that income is function of circumstances out of individual control, effort and unobservable factors, we identify fair and unfair inequalities as components of the total inequality. Our nine-term decomposition of the Gini coefficient nests a structuralist and an individualistic definition of unfair inequality, as well as ex ante and ex post measures of inequality of opportunity, reflecting different weights assigned to circumstances and effort. We illustrate the new decomposition on Belgian data, highlighting the source of a consistent difference between the structuralist and individualistic views about unfair inequality. This result shows the existence of room for new normative principles to close the wedge between these two views.

Authors: Domenico Moramarco.

Keywords: equality of opportunity, Gini decomposition, individualism, structuralism
JEL: D63, D31