SOCLIFE, University of Cologne and IZA
IZA, University of Cologne (FiFo), ISER and CESifo
Previous estimates of unfair inequality of opportunity (IOp) are only lower bounds because of the unobservability of the full set of endowed circumstances beyond the sphere of individual responsibility. In this paper, we suggest a new estimator based on a fixed effects panel model which additionally allows identifying an upper bound. We illustrate our approach by
comparing Germany and the US based on harmonized micro data. We find significant and
robust differences between lower and upper bound estimates – both for gross and net
earnings based either on periodical or permanent income – for both countries. We discuss
the cross-country differences and similarities in IOp in the light of di¤erences in social
mobility and persistence.