Equality of opportunity Roemer, John E; Trannoy, Alain
IDEAS Working Paper Series from RePEc,
12/2016, Letnik:
54, Številka:
4
Journal Article, Paper
Recenzirano
Odprti dostop
During the last third of the twentieth century, political philosophers actively debated about the content of distributive justice; the ruling ethical view of utilitarianism was challenged by various ...versions of equality of opportunities. Economists formulated several ways of modeling these ideas, focusing upon how individuals are placed with respect to opportunities for achieving various outcomes, and what compensation is due to individuals with truncated opportunities. After presenting a review of the main philosophical ideas (section 2), we turn to economic models (sections 3 and 4). We propose a reformulation of the definition of economic development, replacing the utilitarian measure of GDP per capita with a measure of the degree to which opportunities for income acquisition in a nation have been equalized. Finally, we discuss issues that the econometrician faces in measuring inequality of opportunity, briefly review the empirical literature (section 6), and conclude (section 7).
We offer a flexible latent type approach to rank populations according to unequal health opportunities. Building upon the latent‐class method, an approch increasingly adopted to estimate health ...inequalities, our contribution is to let the number of socioeconomic groups considered vary to obtain an opportunity‐inequality curve for a population that gives how the between‐type inequality varies with the number of types. A population A is said to have less inequality of opportunity than population B if its curve is statistically below that of population B. This version of the latent class approach allows for a robust ranking of 31 European countries regarding inequality of opportunity in health.
Even (Mixed) Risk Lovers are Prudent Crainich, David; Eeckhoudt, Louis; Trannoy, Alain
The American economic review,
06/2013, Letnik:
103, Številka:
4
Journal Article
Recenzirano
The purpose of this note is to analyze properties of the risk lovers' utility function beyond the positive sign of its second order derivative. We show that--contrarily to a priori beliefs--risk ...lovers are prudent and are willing to accumulate precautionary savings. (JEL D81) PUBLICATION ABSTRACT
This paper analyzes the relationship between income inequality and inequality of opportunities for income acquisition in nine developed countries during the 1990s. Equality of opportunity is defined ...as the situation where income distributions conditional on social origin cannot be ranked according to stochastic dominance criteria. We measure social origin by parental education and occupation and use the database built by Roemer et al. (2003). Stochastic dominance is assessed using nonparametric statistical tests. Our results indicate strong disparities in the degree of equality of opportunity across countries and a strong correlation between inequality of outcomes and inequality of opportunity. The U.S. and Italy show up as the most unequal countries in terms of both outcome and opportunity. At the opposite extreme, income distributions conditional on social origin are almost the same in Scandinavian countries even before any redistributive policy. We complement the ordinal comparison by resorting to an original scalar “Gini” index of opportunities, which can be decomposed into a risk and a return component. In our sample, inequality of opportunity is mostly driven by differences in mean income conditional on social origin, and differences in risk compensate the return element in most countries.
We build up a general purpose decision model to predict the choice between going to war and staying at peace for a rational decision-maker. This model articulates root causes such as the risk of ...future war and parameters such as potential gains in case of victory, potential losses in case of defeat, the probability of victory and the war human losses. We apply and calibrate this model to the case of German and French decision-makers at the very end of July 1914, taking into account the decisions already taken by Austria-Hungary and Russia and the uncertainty surrounding the decision of Great Britain. We assume a short war that does not last beyond 1914. Our model predicts the entry into the war of Germany and France, the argument of preventive war (going to war today rather than tomorrow) proving to be decisive for both countries, with the added benefit for France of the potential recovery of Alsace-Moselle in the event of victory. The computation reveals that of the two countries, it was France that seems to have the most interest in the war, making it possible to explain the passive behavior of the French leaders, Raymond Poincaré in the first place, who, if they did not provoke the war, did not really try to avoid it either.
Nous construisons un modèle de décision de portée générale permettant de prédire le choix entre l’entrée en guerre et rester en paix d’un décideur rationnel. Ce modèle articule des causes profondes comme le risque de guerre future et d’autres paramètres comme les gains potentiels en cas de victoire, les pertes potentielles en cas de défaite et la probabilité de victoire et les pertes humaines liées au conflit. Nous appliquons et calibrons ce modèle au cas des décideurs allemands et français à la toute fin de juillet 1914, compte tenu des décisions déjà prises par l’Autriche-Hongrie et la Russie et de l’incertitude entourant la décision de la Grande-Bretagne. Nous nous situons dans l’hypothèse d’une guerre courte ne se prolongeant pas au-delà de l’année 1914. Notre modèle prédit l’entrée en guerre de l’Allemagne et de la France, l’argument de la guerre préventive (faire la guerre aujourd’hui plutôt que demain) se révélant déterminant pour les deux pays, avec en plus pour la France les bénéfices non négligeables liés à la récupération potentielle de l’Alsace-Moselle en cas de victoire. La calibration révèle que des deux pays, c’est la France qui semblait avoir le plus intérêt à la guerre, permettant d’expliquer le comportement passif des dirigeants français, Raymond Poincaré en tête, qui, s’ils n’ont pas provoqué la guerre, n’ont pas vraiment non plus cherché à l’éviter.
Nous construisons un modèle de décision de portée générale permettant de prédire le choix entre l’entrée en guerre et rester en paix d’un décideur rationnel. Ce modèle articule des causes profondes ...comme le risque de guerre future et d’autres paramètres comme les gains potentiels en cas de victoire, les pertes potentielles en cas de défaite et la probabilité de victoire et les pertes humaines liées au conflit. Nous appliquons et calibrons ce modèle au cas des décideurs allemands et français à la toute fin de juillet 1914, compte tenu des décisions déjà prises par l’Autriche-Hongrie et la Russie et de l’incertitude entourant la décision de la Grande-Bretagne. Nous nous situons dans l’hypothèse d’une guerre courte ne se prolongeant pas au-delà de l’année 1914. Notre modèle prédit l’entrée en guerre de l’Allemagne et de la France, l’argument de la guerre préventive (faire la guerre aujourd’hui plutôt que demain) se révélant déterminant pour les deux pays, avec en plus pour la France les bénéfices non négligeables liés à la récupération potentielle de l’Alsace-Moselle en cas de victoire. La calibration révèle que des deux pays, c’est la France qui semblait avoir le plus intérêt à la guerre, permettant d’expliquer le comportement passif des dirigeants français, Raymond Poincaré en tête, qui, s’ils n’ont pas provoqué la guerre, n’ont pas vraiment non plus cherché à l’éviter.
We characterize the set of second-best "menus" of student-loan contracts in an economy with risky labor-market outcomes, adverse selection, moral hazard, and risk aversion. We combine student loans ...with optimal income taxation. Second-best optima provide incomplete insurance because of moral hazard. Optimal repayments must be income contingent, or the income tax must comprise a graduate tax. Individuals are ex ante unequal because of differing probabilities of success, and ex post unequal, because taxation trades off incentives and redistribution. In addition, second-best optima exhibit an interim equalization property: the poststudy but prework expected utilities of newly graduated student types must be equal.
We adopt a philosophical perspective of equality of opportunity and address the issue of whether outcome inequalities are legitimate when they come from differences in talent. We propose a cumulative ...definition of talent. In a dynamic setting, talent is a by-product of past-effort, current effort and innate talent, which becomes a residual as time goes by. It implies that talent can change from the status of a circumstance when people are young to an almost responsibility variable when people are getting older. We plug this definition of talent into the Mirrlees model of optimal non-linear income tax and we show that the conflict between the principle of compensation and the principle of natural reward boils down to the optimal income tax with Rawlsian weights in the second-best setting.
Considering optimal non-linear income tax problems when the social welfare function only depends on ranks as in Yaari (Econometrica 55(1):95–115, 1987) and weights agreeing with the Lorenz ...quasi-ordering, we extend the analysis of Simula and Trannoy (Am Econ J Econ Policy, 2021) in two directions. First, we establish conditions under which bunching does not occur in the social optimum. We find a sufficient condition on individual preferences, which appears as a reinforcement of the Spence-Mirrlees condition. In particular, the marginal dis-utility of gross income should be convex, but less convex the higher the productivity. We also show that, for all productivity distributions with a log-concave survival function, bunching is precluded under the maximin, Gini, and “illfare-ranked single-series Ginis”. Second, we turn to a discrete population setting, and provide an “ABC” formula for optimal marginal tax rates, which is related to those for a continuum of types found in Simula and Trannoy (2021), but remain essentially distinct.
We investigate how potential tax-driven migrations modify the Mirrlees income tax schedule when two countries play Nash. The social objective is the maximin and preferences are quasi-linear in ...consumption. Individuals differ both in skills and migration costs, which are continuously distributed. We derive the optimal marginal income tax rates at the equilibrium, extending the Diamond-Saez formula. We show that the level and the slope of the semielasticity of migration (on which we lack empirical evidence) are crucial to derive the shape of optimal marginal income tax.
PDF
