Inequality in Earnings and Adverse Shocks in Early Adulthood
The inequality of opportunity theory postulates that achievement gaps arising because of factors beyond the individual's control are morally unacceptable and should therefore be compensated by society. These factors or circumstances range from...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2018
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/672161533317723627/Inequality-in-earnings-and-adverse-shocks-in-early-adulthood http://hdl.handle.net/10986/30228 |
| Summary: | The inequality of opportunity theory
postulates that achievement gaps arising because of factors
beyond the individual's control are morally
unacceptable and should therefore be compensated by society.
These factors or circumstances range from the
individual's social background to adverse shocks. Most
studies have focused on the contribution of social
background and genetic and other childhood-related
circumstances to inequality of opportunity. Borrowing
insights based on the impressionable years hypothesis in
social psychology, this paper tests how exposure to adverse
shocks, such as war, in early adulthood (ages 18-25) affects
the individual's future labor earnings and subsequently
contributes to earnings inequality. The application to the
Democratic Republic of Congo is associated with two
significant takeaways. First, all else equal, individuals
who experience intensely violent conflict at a young age
earn significantly less than their counterparts. Second,
after controlling for the individual's social
background, the share of overall inequality in earnings
accounted for by the experience of adverse shocks in early
adulthood is not negligible, ranging from 2.5 to 3.5
percent. These insights broaden our understanding in the
discussion on inequality of opportunity and represent a new
path in the design of allocation policies that seek to
reduce inequality and poverty. |
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