Measuring Unfair Inequality: Reconciling Equality of Opportunity and Freedom from Poverty

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Measuring Unfair Inequality: Reconciling Equality of Opportunity and Freedom from Poverty, a new working paper by Hufe, Kanbur and Peichl, takes up the issue of multifaceted inequality by putting forth a new measure of unfair inequality. The authors argue that inequality is not bad per se, but that one should differentiate between different aspects of inequality in order to make normative statements about the fairness of a given income distribution.

Hufe, Kanbur and Peichl focus on two widely held principles of justice: equality of opportunity and freedom from poverty. Inequality of opportunity exists when individual outcomes are a result of factors one has no control over, such as gender, race or parental resources. Poverty is understood as an extreme outcome, in which people do not have sufficient resources to make ends meet. Both of these concepts are considered equally important when measuring unfair inequality. Thus, Hufe and colleagues combine both considerations in a co-equal fashion to provide a more comprehensive empirical measure for unfair inequality.

To illustrate the use and significance of the new measure, Hufe and colleagues provide empirical evidence on cross-national inequalities in Europe and the development in the United States over time. The results indicate a higher level of unfair inequality compared to existing measures. Furthermore, the ranking of distributions is markedly different in comparison to measures that focus on either of the two principles in isolation. This confirms, that their measure can provide fundamental insights into the normative structure of income distributions and their evolution.