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Inequality and Opportunity

Inequality and Opportunity: The Relationship Between Income Inequality and Intergenerational Transmission of Income

Francisco Perez-Arce
Ernesto F. L. Amaral
Haijing Huang
Carter C. Price
Copyright Date: 2016
Published by: RAND Corporation
Pages: 90
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  • Book Info
    Inequality and Opportunity
    Book Description:

    The authors review recent trends in inequality in outcomes and opportunity and present evidence on their correlation across countries and within countries across time, then present a framework to understand the mechanisms underlying the relationship between inequalities in income and opportunity and discuss the potential effects of policies on opportunity and how these can be quantitatively assessed.

    eISBN: 978-0-8330-9585-5
    Subjects: Business, Economics, Sociology

Table of Contents

  1. Front Matter
    (pp. i-ii)
  2. Preface
    (pp. iii-iv)
  3. Table of Contents
    (pp. v-vi)
  4. Figures
    (pp. vii-viii)
  5. Tables
    (pp. ix-x)
  6. Summary
    (pp. xi-xiv)
  7. Acknowledgments
    (pp. xiii-xiv)
  8. Abbreviations
    (pp. xv-xvi)
  9. CHAPTER ONE Introduction
    (pp. 1-2)

    The United States, like much of the developed world, has seen a rise in the primary measures of income inequality over the last four decades. These trends have been driven largely by rapid increases in the concentration at top of the income distribution. Beyond concerns about inequality in and of itself, some economists and commentators have expressed various concerns about the negative implications of this trend. Some worry about the potential impact of inequality on economic growth.¹ Others are concerned that income inequality harms democratic representativeness. While these are important areas of study, this report focuses on the impact that...

  10. CHAPTER TWO Framework for Understanding Inequality in Income and Opportunity
    (pp. 3-8)

    This chapter presents a simple framework of income and opportunity inequality and discusses different measures and proxies of these concepts. We argue that, depending on the sources of the increase in inequality, we may expect different consequences for inequality of opportunity.

    Throughout this report, we focus on two broad concepts of inequality. The first, and most common in the economic literature, isinequality of outcomes, which refers to the extent to which there is variation in outcomes, such as income and wealth in a population. This may refer to variation in the amounts that people earn (income inequality) or what...

  11. CHAPTER THREE Trends in Inequality
    (pp. 9-22)

    In this chapter, we first take a brief look at longer-run trends in income inequality before delving into a more in-depth analysis of the recent trends. After describing the trends in household and individual income inequality since the 1980s, we discuss what these trends could imply for inequality of opportunity. The discussion refers to the U.S. case, but we present some comparisons to other developed countries as well.

    In broad (and perhaps overly simplistic) terms, reductions in inequality during the most of the 20th century were marked by increases in the levels of accumulation of assets—most notably education and...

  12. CHAPTER FOUR The Relationship Between Income Inequality and Intergenerational Transmission of Income
    (pp. 23-40)

    A central concern is that the recent increases in inequality have translated into a society that is less mobile, with opportunities less widely shared. This concern is supported by research that shows that countries with higher income inequality have less intergenerational mobility. However, there is considerably less evidence on the trends in inequality of opportunity than on inequality of outcomes.

    This chapter describes the relationship between income inequality and inequality of opportunity (the degree to which conditions at birth and childhood determine adult chances). We first analyze the cross-country and cross-time correlations between measures of income inequality and inequality of...

  13. CHAPTER FIVE Potential Impact of Policies on Inequality and Inequality of Opportunity
    (pp. 41-50)

    In this chapter, we focus on the impact of policies on income inequality and intergenerational transmission of income. A broad range of policies, including those aimed at reducing poverty, are likely to reduce income inequality and increase mobility.

    As we discussed in Chapter Three, policy has a significant impact on inequality—given that measures of inequality of market income are lower after tax and transfer incomes are taken into account¹ —and may also reduce inequality of opportunity. However, these policies affect incentives and therefore behavior, and so their effect on inequality of opportunity and outcomes go beyond their direct impact....

  14. CHAPTER SIX Conclusion and Road Map for Further Work
    (pp. 51-52)

    Even though there are several ways to measure inequality, and each has its strengths and weaknesses, there is consistent evidence that income inequality has risen since the 1980s, driven by increased inequality in labor market earnings.

    A large part of the increase in income inequality has been driven by increased concentrations in the top 1 percent of the income distribution. A range of expanded antipoverty programs in the United States has cushioned the impact of the increase in inequality on the poor. Parents’ income affects their children’s outcomes more at the bottom end of the income distribution. Antipoverty programs are...

  15. APPENDIX A Factors for the Increase in Wage Inequality
    (pp. 53-56)
  16. APPENDIX B Reference Sources for the Great Gatsby Curves
    (pp. 57-60)
  17. APPENDIX C Results of Income Support Simulation
    (pp. 61-62)
  18. APPENDIX D Within-Country Changes in Inequality of Income and Opportunity: Analysis for Additional Countries
    (pp. 63-64)
  19. References
    (pp. 65-74)