The Income Inequality by Opportunity in the U.S. and its Roots

Income inequality in the United States had reached its peak level in 50 years, and it is still growing Setting aside the scathing critique from the humanitarian and social justice sphere on severe inequality, a line of research corroborates the negative impact of income inequality on economic growth. This negative relationship is conspicuous when income inequality is entailed by inequality of opportunity instead of individuals’ efforts. In light of this view, this research adopt Roemer’s conception of inequality of opportunity to differentiate the causes of income inequality by social circumstances and individuals’ effort. I assess the social circumstances that contribute to the current income inequality in the U.S. by utilizing the conditional inference tree method. After analyzing the structure of income inequality in the U.S. by deriving a regression tree, I elaborate the heterogeneity of inequality of opportunity across U.S. states and age groups by comparing trees across subgroups and estimating the opportunity-base Gini-coefficient measuring income inequality associated with social circumstances. The results suggest that race and ethnicity are the most dominant circumstance factors at country level analysis. Furthermore, at state level analysis, there exist heterogeneous characteristics based on the spatial allocation of the states. Lastly, this analysis did not detect a significant differences of the structure of the income inequality among different age groups