To what extent do fiscal regimes equalize opportunities for income acquisition among citizens?

Abstract

International audienceThis paper employs the theory of equality of opportunity, described in Roemer's book (Equality of Opportunity, Harvard University Press, 1998), to compute the extent to which tax-and-transfer regimes in 11 countries equalize opportunities among citizens for income acquisition. Roughly speaking, equality of opportunity for incomes has been achieved in a country when it is the case that the distributions of post-fisc income are the same for different types of citizen, where a citizen's type is defined by the socioeconomic status of his parents. Intuitively, a country will have equalized opportunity if the chances of earning high (or low) income are equal for citizens from all family backgrounds. Of course, pre-fisc income distributions, by type, will not be identical, as long as the educational system does not entirely make up for the disadvantage that children, who come from poor families face, but the tax-and-transfer system can play a role in rectifying that inequality. We include, in our computation, two numbers that summarize the extent to which each country's current fiscal regime achieves equalization of opportunities for income, and the deadweight loss that would be incurred by moving to the regime that does.

Equality of opportunity and luck: Definitions and testable conditions, with an application to income in France

“…5 The assumption that the determinants of outcomes excluded from socially defined circumstances relate to individual effort provides a good approximation of US average beliefs. It does not however correspond to the social perception in many European countries, 2 For a theoretical discussion, see Roemer (1993Roemer ( , 1998 and for empirical applications Betts & Roemer (2006), Roemer et al (2003) and Dardanoni et al (2005).…”

Health opportunities in Colombia

“…For example, see Roemer et al (2003), Brunello and Checchi (2007), Ferreira and Gignoux (2011), Trannoy (2008, 2009), Pistolesi (2009) andSchütz, Ursprung andWößmann (2008). The theory of equality of opportunity has been applied also to health issues.…”

Income inequality, redistribution and the position of the decisive voter

“…We assume f consists of both a lump sum income transfer component c and a public good component g. Heterogeneity is achieved by allowing individuals' wage rate (w) and labour supply (L) to differ. We use the same utility function as in Roemer et al (2003), where utility is increasing in net disposable income (y) and decreasing in labour supply:…”

“…If gross income is lognormally distributed, the country and year specific parameters of the lognormal distribution of income can be derived from the Gini coefficients and GDP per capita. We derive the optimal labour supply using the methodology from Roemer et al (2003), giving the distribution of wages and labour supply and the formula for the tax rate and the lump sum transfer. We show that the preferred proportional tax rate is dependent on one's earnings capacity and identify the decisive voter as the one whose preferred tax rate is equal to the empirically estimated tax rate.…”