Starting from January 1, 2008, Journal of Economic Inequality has become the official journal of ECINEQ.
Original Paper, Pages 213-237
Measurement of inequality of opportunity: a normative approach
Kristof Bosmans, Z. Emel Öztürk
We develop a normative approach to the measurement of inequality of opportunity. That is, we measure inequality of opportunity by the welfare gain obtained in moving from the actual income distribution to the optimal income distribution of the total available income. Our study brings together the main approaches in the literature: we axiomatically characterize social welfare functions, we obtain prominent allocation rules as their optima, and we derive familiar classes of inequality of opportunity measures. Our analysis captures moreover the key philosophical distinctions in the literature: ex post versus ex ante compensation, and liberal versus utilitarian reward.
Original Paper, Pages 239-264
Individuals’ socioeconomic position, inequality perceptions, and redistributive preferences in OECD countries
The standard model of redistribution posits that attitudes towards redistribution are driven by pure economic self-interest, such as current income. From a social-psychological perspective, however, subjective social status, apart from objective income or social status, is also closely associated with policy preferences. This inquiry directly compares these two different approaches and further explores the role of individuals’ inequality perceptions, including personal norms of inequality to which researchers have paid little attention so far, in shaping individuals’ preferences for redistribution. The current evidence shows that the explanatory power of objective income position is not stronger than that of subjective social position in determining redistributive preferences, while objective social position, which is a summary measure of income, education, and occupation, is more strongly associated with the preferences than perceived social position. The results also demonstrate that individuals’ inequality norms play a more crucial role in the preference formation than does their perceptions of actual inequality. These new findings contribute to redistributive politics and behavioural economics on other-regarding preferences, first, by rebutting the determining role of objective income position in shaping redistributive preferences, as opposed to the basic assumption of the conventional redistribution hypothesis; second, by providing the empirical evidence of the importance of social preferences outside the field of experimental studies.
Original Paper, Pages 265-291
Self-centered and non-self-centered inequality aversion matter: Evidence from Uruguay based on an experimental survey
Santiago Burone, Martin Leite
In this paper we provide evidence on the empirical relevance of two notions of inequality aversion that have been explored in the literature: self-centered and non-self-centered inequality aversion. We used a flexible model and designed an experimental survey that allowed us to address jointly both of these notions of inequality aversion and to distinguish their relevance. The survey was administered to a sample of first-year University students in Uruguay. The findings confirm the empirical relevance of both notions of aversion to inequality in a developing country. Most study participants exhibited non-self-centered inequality aversion, while a minority of the individuals in our sample appeared to favor inequality. In general the magnitude of aversion to inequality varied as a function of individuals’ position in the income distribution. self-centered income aversion is influenced by many factors, which is manifested in the fact that the magnitude of its parameters is more heterogeneous in compression to non-self centered aversion. In a minority of individuals, self-centered aversion has zero effect, and they are more willing to pay to reduce non-self-centered inequality. Finally, considering both notions together may help prevent bias in the measurement of inequality aversion.
Original Paper, Pages 293-313
Income and wealth volatility: evidence from Italy and the U.S. in the past two decades
Giorgia Menta, Edward N. Wolff, Conchita D’Ambrosio
Income volatility and wealth volatility are central objects of investigation for the literature on income and wealth inequality and dynamics. Here we analyse the two concepts in a comparative perspective for the same individuals in Italy and the U.S. over the last two decades. We find that in both countries wealth volatility reaches significantly higher values than income volatility, the effect being mostly driven by changes in the market value of real estate assets. We also show that there is more volatility in both dimensions in the U.S. and that the overall trend in both countries is increasing over time. We conclude by exploring volatility in consumption.
Original Paper, Pages 315-346
Choosing inequality: how economic security fosters competitive regimes
Alexander Lenger, Stephan Wolf, Nils, Goldschmidt
In a novel experimental design, we study how social immobility affects the choice among distributional schemes in an experimental democracy. We design a two-period experiment in which subjects first choose a distributional scheme by majority voting (“social contract”). Then subjects engage in a competitive real-effort task to earn points. Based on production success, participants are ranked from best to worst. In combination with the initially chosen scheme, these ranks determine the final payout of the first round, leading to a pattern of societal stratification. Participants are informed individually about points and rank, before the same sequence of voting, production and payoff determination is repeated in a second round. To test the effect of social immobility on choosing distributional regimes the experiment is conducted with and without a social immobility factor, i.e. a different weighting of the two rounds. In our standard scenario, payoffs are simply added. In our “social immobility setting”, we alter the game as follows: the actual income in round 2 is calculated by adding 0.2 times the raw payoff from the second production game and 0.8 times the income from round 1. With the higher importance of round 1 success, we simulate the fact that economic movement upwards and downwards in societies (“social mobility”) is a de facto rigid constraint: high and low incomes tend to reproduce themselves. Our main findings are that in the Equal Weight Treatment, most groups opt for complete equality in both rounds, while in the unequal weight setting the initial choice of equality is followed by a shift to the most competitive regime. In both treatments, we observe that those performing well in round 1 tend to vote for unequal schemes in round 2, while low-performers develop an even stronger “taste for equality”. This supports a central Rawlsian idea: behind an (experimental) “veil of uncertainty”, the lack of idiosyncratic information is strong enough to let people decide as if driven by social preferences. The different group decisions in round 2 suggest that for this to happen, stakes need to be sufficiently high. To our surprise, other factors like gender, social background or real-life income have hardly any impact on unveiled decision making. We conclude that in our experimental democracy, competition based income allocation (a “market economy”) finds support only if people are sufficiently well off. Hence, increasing inequality perpetuated by social immobility is likely to undermine the general support for market-based systems.
Original Paper, Pages 347-362
Gender disparities in top earnings: measurement and facts for Denmark 1980-2013
Niels-Jakob Harbo Hansen, Karl Harmenberg, Erik Öberg, Hans Henrik Sievertsen
Extending the work of Atkinson et al. (J. Econ. Inequal. 16, 225–256, 2018), we decompose top-earnings gender disparities into a glass-ceiling coefficient and a top-earnings gender gap. The decomposition uses that both male and female top earnings are Pareto distributed. If interpreting top-earnings gender disparities as caused by a female-specific earnings tax, the top-earnings gender gap and glass-ceiling coefficient measure the tax level and tax progressivity, respectively. Using Danish data on earnings, we show that the top-earnings gender gap and the glass-ceiling coefficient evolve differently across time, the life cycle, and educational groups. In particular, while the top-earnings gender gap has been decreasing in Denmark over the period 1980-2013, the glass-ceiling coefficient has been remarkably stable.
Original Paper, Pages 163-183
A conditional Gini: measure, estimation, and application
Christian Ahlin, Hyeok Jeong
The Gini measure of inequality can be written as the ratio of means. By extension, we define the conditional Gini as the ratio of conditional means. This conditional Gini shows how inequality varies with population characteristics, both levels and differences, and creates novel opportunities to trace inequality as differences in observables vary across the population. We propose a regression-based method for estimating the conditional Gini, and a method for inference using recent techniques for clustered data. The conditional Gini is estimated using a large, nationally representative household survey from Thailand. We find that wealth differences are associated with significantly less income inequality among households that use the financial sector than among those that do not, consistent with the idea that financial access relaxes self-financing constraints and broadens economic opportunity.
Original Paper, Pages 185-212
Walls of glass. Measuring deprivation in social participation
This paper proposes a measure for deprivation in social participation, an important but so far neglected dimension of human well-being. Operationalisation and empirical implementation of the measure are conceptually guided by the capability approach. Essentially, the paper argues that deprivation in social participation can be convincingly established by drawing on extensive non-participation in customary social activities. In doing so, the present paper synthesizes philosophical considerations, axiomatic research on poverty and deprivation, and previous empirical research on social exclusion and subjective well-being. An application using high-quality German survey data supports the measure’s validity. Specifically, the results suggest, as theoretically expected, that the proposed measure is systematically different from related concepts like material deprivation and income poverty. Moreover, regression techniques reveal deprivation in social participation to reduce life satisfaction substantially, quantitatively similar to unemployment. Finally, the validity of the measure and the question of preference vs. deprivation are discussed.