Economic Growth and Equality of Opportunity

Abstract

In this paper, we argue that a better understanding of the relationship between inequality and economic growth can be obtained by shifting the analysis from the space of final achievements to the space of opportunities. To this end, we introduce a formal framework based on the concept of the Opportunity Growth Incidence Curve. This framework can be used to evaluate the income dynamics of specific groups of the population and to infer the role of growth in the evolution of inequality of opportunity over time. We show the relevance of the introduced framework by providing two empirical analyses, one for Italy and the other for Brazil. These analyses show the distributional impact of the recent growth experienced by Brazil and the recent crisis suffered by Italy from both the income inequality and opportunity inequality perspectives. JEL codes: D63, E24, O15, O40 In recent years, a central topic in the economic development literature has been the measurement of the distributive impact of growth (see Ferreira 2010). This literature has provided analytical tools to identify and quantify the effect of growth on distributional phenomena such as income poverty and income inequality. Indices for measuring the pro-poorness of growth have been proposed, 2 and the Growth Incidence Curve (GIC), measuring the quantile-specific rate of economic growth in a given period of time (Ravallion and Chen 2003; Son 2004), has become a standard tool in evaluating growth from a distributional viewpoint. The interplay among growth, inequality, and poverty reduction has

Consumption dynamics and inequality of opportunity with an application to Uganda

“…In particular, we have proposed an extension to the ex post dimension of EOp of the OGIC framework introduced by Peragine et al. () that is generally valid when the ex ante perspective of EOp is endorsed. Our framework consists of the so‐called ex post individual OGIC, that is, plotting the rate of growth of the individuals in the same position in two outcome distributions neutralized for the effect of effort on inequality, and class OGIC, that is, plotting the rate of income growth for each subgroup of the population, where the subgroups are defined in terms of individuals who share the poorest outcome for each given level of effort.…”

“…To address this specific issue and to investigate the relationship between overall economic growth and type‐specific growth, Peragine et al. () introduce the type OGIC. Given this analytical framework, the focus is on the outcome prospects of individuals of the same type, represented by the type‐specific outcome distribution F i ( y t ).…”

“…This explains why Peragine et al. () introduce two versions of the OGIC: ex ante individual OGIC and type OGIC, which respectively furnish an answer to the first and second questions above. They, in fact, show that the two curves can lead to different judgments in very general cases.…”

“…We endorse this view, and in this paper, we propose an extension of the theoretical framework introduced by Peragine, Palmisano, and Brunori () to investigate the distributional impact of growth. In their paper, the opportunity redistributive impact of growth is measured by estimating the individual “opportunity growth incidence curve” (individual OGIC) and the type “opportunity growth incidence curve” (type OGIC).…”

“…This, of course, has implications when the evaluation of growth under the light of EOp becomes the focus of the analysis: the result is that the OGIC framework introduced by Peragine et al. (), which is based on the ex ante approach, is not fully consistent with the ex post approach.…”