Opportunity-Sensitive Social Welfare

Abstract

In this paper, we develop a new framework to evaluate income distributions from the perspective of an opportunity-egalitarian planner. This planner faces a costly trade-off between treating people as equals and treating them unequally to equalize opportunities. The resolution of this trade-off depends on the extent of the planner’s inequality-of-opportunity aversion. We use this framework to derive social welfare and inequality measures that are governed by a single parameter capturing the planner's preferences. We bring these measures to the data and analyze inequality of opportunity in the United States. Concretely, we build on the recent literature on intergenerational mobility and study the robustness of its conclusions about time trends and spatial variation in unequal opportunities to assumptions about the planner's preference for equal opportunities. We show that many commonly held conclusions about trends and spatial variation in inequality of opportunity are highly sensitive to the assumed degree of inequality-of-opportunity aversion. Joint paper with Brice Magdalou.