Inequality, Opportunity, and Social Mobilitywhat do we care about? what should we do?

Miles CorakDepartment of Economics, and Stone Center on Socio-Economic Inequality

The Graduate Center, City University of New YorkMilesCorak.com @MilesCorak

Lecture 1ECON 85600

Inequality, Economic Opportunity, and Public Policy

Overview Presentation

Figure 1: We care about both absolute and relative social mobility forboth instrumental and intrinsic reasons

1. Inequality is on the risebut what kind of inequality matters for social mobility?

1975 1980 1985 1990 1995 2000 2005 2010 2015 2020

% of total market incomeaccuring to the top one per cent

4

6

8

10

12

14

16

18

2020.2 %United States

13.2 %Canada

9.1 %Australia

2. Higher inequality threatens social mobilityaccess to opportunity is the channel through which this threat passes

20 30 40 50 60

20

40

60

80

100

Higher Inequality(disposable income Gini in parent's generation)

Fra

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ineq

ualit

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)

2. Higher inequality threatens social mobilityaccess to opportunity is the channel through which this threat passes

20 30 40 50 60

20

40

60

80

100

Higher Inequality(disposable income Gini in parent's generation)

Fra

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ineq

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to th

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Albania

BeninBolivia

Bosnia and Herzegovina

Colombia

Ecuador

Egypt, Arab Rep.

Guatemala

Latvia

MoroccoPanama

Rwanda

Tunisia

Uganda

2. Higher inequality threatens social mobility (OECD)access to opportunity is the channel through which this threat passes

20 25 30 35 40

10

20

30

40

50

Higher Inequality(disposable income Gini in parent's generation)

Fra

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ineq

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n (%

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AUS

AUT

BEL

CAN

CHEDEU

DNK

ESP

FIN

FRA

GBR

GRC

IRL

ITA

JPN

KORLUX

MEX

NLDNZL

NOR

PRT

SVN

SWE

USA

3. Social mobility varies within countrieswhat are the lessons of within country comparisons?

Figure 2:

‘Inclusive growth’ is economic and social development ofrelatively more advantage to the relatively disadvantaged

Equality of economic opportunities is an aspect of inclusivegrowth

1. For instrumental reasonsI equal opportunity fosters efficiency and productivity, and

tempers the intergenerational transmission of inequality

2. For intrinsic reasonsI equal opportunity might be seen as being ‘fair,’ leading to less

concern about resulting inequality of outcomes

‘Inclusive growth’ is economic and social development ofrelatively more advantage to the relatively disadvantaged

Equality of economic opportunities is an aspect of inclusivegrowth

An opportunity-enhancing menu for public policyI recognizes three drivers of social mobility that influence the

intergenerational transmission of inequality1. an “inheritance”2. an investment3. a payoff

I is explicit about the type of inequality that should be a concern:top, bottom or middle ?

I intervenes at the point in the production cycle holding thegreatest marginal return:before market, market, post-market

Figure 3: A polciy menu to promote opportunity and mobility

Miles Corak

Department of Economics and

The Stone Center on Socio-Economic Inequality

The Graduate Center, City University of New York

@MilesCorak

MilesCorak.com