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Equality of opportunity, moral hazard and the timing of luck

Author

Listed:
  • Arnaud Lefranc

    (THEMA - Théorie économique, modélisation et applications - UCP - Université de Cergy Pontoise - Université Paris-Seine - CNRS - Centre National de la Recherche Scientifique)

  • Alain Trannoy

    (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)

Abstract
Equality of opportunity is usually defined as a situation where the effect of circumstances on outcome is nullified (compensation principle) and effort is rewarded (reward principle). We propose a new version of the reward principle based on the idea that effort deserves reward for it is costly. We show that luck can be introduced in two ways in the definition of these principles, depending on whether the correlation between luck and circumstances should be nullified and whether the correlation between luck and effort should be rewarded. In this regard, the timing of luck with respect to effort decisions is crucial, as is exemplified by moral hazard where effort choice influences the lottery of future uncertain events.

Suggested Citation

  • Arnaud Lefranc & Alain Trannoy, 2017. "Equality of opportunity, moral hazard and the timing of luck," Post-Print hal-01648187, HAL.
    • Handle: RePEc:hal:journl:hal-01648187
    DOI: 10.1007/s00355-017-1054-8
    Note: View the original document on HAL open archive server: https://hal.science/hal-01648187
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    References listed on IDEAS

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    Cited by:

    1. Aizawa, Toshiaki, 2019. "Ex-ante Inequality of Opportunity in Child Malnutrition: New Evidence from Ten Developing Countries in Asia," Economics & Human Biology, Elsevier, vol. 35(C), pages 144-161.
    2. Begoña Cabeza & Koen Decancq, 2018. "Effort or Luck? Believing in the role of effort during the Spanish economic recession," Working Papers 1818, Herman Deleeck Centre for Social Policy, University of Antwerp.
    3. Camarero Garcia, Sebastian, 2022. "Inequality of Educational Opportunities and the Role of Learning Intensity," Labour Economics, Elsevier, vol. 74(C).
    4. Francesco Andreoli & Mathieu Faure & Nicolas Gravel & Tista Kundu, 2021. "Evaluating distributions of opportunities from behind a veil of ignorance: A robust approach," Working Papers halshs-03294267, HAL.
    5. Baochun Peng & Haidong Yuan, 2021. "Dynamic Fairness: Mobility, Inequality, and the Distribution of Prospects," Scandinavian Journal of Economics, Wiley Blackwell, vol. 123(4), pages 1314-1338, October.
    6. Francesco Andreoli & Tarjei Havnes & Arnaud Lefranc, 2019. "Robust Inequality of Opportunity Comparisons: Theory and Application to Early Childhood Policy Evaluation," The Review of Economics and Statistics, MIT Press, vol. 101(2), pages 355-369, May.
    7. Vincenzo Carrieri & Apostolos Davillas & Andrew M. Jones, 2020. "A latent class approach to inequity in health using biomarker data," Health Economics, John Wiley & Sons, Ltd., vol. 29(7), pages 808-826, July.
    8. Davillas, Apostolos & Jones, Andrew M, 2020. "Ex ante inequality of opportunity in health, decomposition and distributional analysis of biomarkers," Journal of Health Economics, Elsevier, vol. 69(C).
    9. Burlinson, Andrew & Davillas, Apostolos & Giulietti, Monica, 2023. "Socioeconomic Inequality in Low-Carbon Technology Adoption," IZA Discussion Papers 16114, Institute of Labor Economics (IZA).

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    More about this item

    Keywords

    equality of opportunity; effort; luck; timeline; moral hazard; reward;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General

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