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Social Choice and Welfare

, Volume 43, Issue 1, pp 73–99 | Cite as

Upper bounds of inequality of opportunity: theory and evidence for Germany and the US

  • Judith Niehues
  • Andreas PeichlEmail author
Original Paper

Abstract

Previous estimates of inequality of opportunity (IOp) are lower bounds because of the unobservability of the full set of endowed characteristics beyond the sphere of individual responsibility. Knowing the true size of unfair IOp, however, is important for the acceptance of (some) inequality and the design of redistributive policies as underestimating the true amount of IOp might lead to too little redistribution. This paper suggests a fixed effects estimator for IOp which can be interpreted as an upper bound. We illustrate our approach by comparing Germany and the US based on harmonized micro data. We find significant, sizeable and robust differences between lower and upper bound estimates—both for gross and net earnings based on either periodical or permanent income—for both countries.

Keywords

Permanent Income Labor Earning Circumstance Variable Outcome Inequality Female Subsample 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Notes

Acknowledgments

We are grateful for financial support by Deutsche Forschungsgemeinschaft DFG (GRK1461 and PE1675). We would like to thank two anonymous referees, Marc Fleurbaey (the Editor), Rolf Aaberge, Ingvild Almås, Paolo Brunori, Koen Caminada, Koen Decanq, Philipp Doerrenberg, Dan Hamermesh, David Jaeger, Peter Kuhn, Dirk Neumann, Nico Pestel, Erwin Ooghe, Andrew Oswald, John Roemer, Sebastian Siegloch, Chris Taber, Alain Trannoy and Philippe Van Kerm as well as seminar and conference participants in Ann Arbor, Bonn, Canazei, Cologne, Marseille, Milan and Rome for helpful comments and suggestions. The usual disclaimer applies.

Supplementary material

355_2013_770_MOESM1_ESM.pdf (66 kb)
Supplementary material 1 (PDF 67 KB)

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Copyright information

© Springer-Verlag Berlin Heidelberg 2013

Authors and Affiliations

  1. 1.Cologne Institute for Economic Research (IW)CologneGermany
  2. 2.IZABonnGermany
  3. 3.Centre for European Economic Research (ZEW)MannheimGermany
  4. 4.University of MannheimMannheimGermany

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