Opportunity and Mobility

1
Opportunity and Mobility

• Frank A. Cowell
• London School of Economics
• 14 September 2009

2
Opportunity Beliefs and Reality?

• What do we believe about economic opportunity?
• Policy makers link it with mobility
• Transcends countries and culture
• But beliefs sometimes in conflict with reality

3
Questions

• Are mobility and economic opportunity linked?
• What is meant by mobility?
• Is this something that differs from one society
  to another?
• Connections with other concepts?
• inequality?
• polarisation?
• Have the experts got the basics right?
• economists sometimes go for elegant solutions
• that are wrong
• why not find out?

4
An Example from Inequality

• What does Inequality mean?
• Often confused with other questions
• does it matter?
• should we focus on income, expenditure, something
  else?
• is it a good/bad thing?
• But do we know the essence of what we are talking
  about?
• Extremes are clear
• perfect equality
• perfect inequality
• But what about the murky in-betweens?
• A little visual exercise

5
Which group seems to have the more unequal
distribution?
6
Heterodox Answer
7
Orthodox Answer
8
Asking about mobility

• The Italian Job
• use same type of methods?
• focus on the meaning of mobility
• contrast with inequality?
• Study using Italian students
• 271 economics students
• University of Insubria in Varese
• Problem obviously more complex
• mobility is a from-to concept
• not a snapshot
• graphics representation is tricky
• A mixture of fundamentals and values

9
Mixing in A, rigidity in B
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What about narrowing?
11
Narrowing versus Mixing?
12
Results with pictures

• The majority of subjects prefer the society where
  mobility is higher
• In most cases more mobility induces stronger
  preferences
• Majority of subjects prefer the society where
  inequality is lower.
• Preferences for income equality do not become
  weaker with more income mobility
• Trade-off between preferences for mobility and
  for equality subjects willing to sacrifice some
  equality if this is necessary to obtain more
  mobility

13
An Experiment With Real People

• The French Connection
• Marseille pretest
• a science fair
• run last November
• Examine meaning of opportunity
• A variety of methods
• questions on opinions
• vignettes
• live experiment

14
Marseille Science Fair
15
What does a mobile society mean?
16
What matters for success in a career?
17
Who deserves to be highly paid?
18
Unacceptable advantages of children who have
grown up in rich families
19
Who deserves to be educated?
20
The role of inheritance
21
Vignettes

• Three vignettes
• Framing and context effects for equality of
  opportunity
• Two about seller
• Positive Success and compensation means taxation
• Negative Failure and compensation means
  subsidies (tax credit)
• One about education
• Negative Failure compensation means extra help

22
What merits the sellers bonus?
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Good luck / bad luck / Opportunity

• Looking deeper
• Option luck not the same treatment for bad and
  good luck
• Good option luck is treated as effort and talent
• Some kind of preference reversal for bad luck
• Bad option luck deserves some compensation but
  less than bad circumstances or bad brute luck

24
An experiment

• Mimic a micro-society where success / failure
  depends on
• Circumstances born in Marseille (39 of the
  sample)
• Effort (test used by psychologists to measure
  attention deficits)
• Brute luck we toss a coin
• Option luck participants can bet or not
• We ask people before knowing their own results to
  express feelings about the fairness of gains or
  losses at each stage
• We give people the results in the laissez-faire
  economy and we organize a sequence of votes
• do they want to stick to the laissez-faire
  outcome?
• do they want to redistribute half of the gains?
  (partial redistribution)
• do they want total redistribution?

25
Stated Preferences
26
Voting Results
27
Principle and Practice

• About 1/3 change their mind between the opinion
  and the vote
• Who is in favour of a 50 redistribution?

28
Looking Forward

• Hook-up with multi-country survey
• ESS
• Gallup
• Look at cross-country comparisons
• Do Anglo-Saxons think different from Latins?
• East Europeans from West?
• Use this to inform policy makers