On the Substitutability between Equal Opportunities and Income Redistribution

This paper investigates the supposed substitutability between equal opportunities and public redistribution. In the first part a theory which finds a substitutability between redistribution and equal chances in determining the extent of incomes inequality (Gini Index) is presented. This result is obtained including inequality of opportunities in the labor market, and preferences for leisure in the individual utility function. The model suggests that an optimal level of universalistic redistribution (maximizing average utility) exists, which is increasing with respect to inequality of opportunities. The subsequent empirical exercises offer a plausible measure of meritocracy, besides being a support for the validity of the theoretical model. Moreover, the empirical analysis suggests that there could be countries which should enhance redistribution and others which should reduce it, given their level of opportunities inequality.