Inequality of Opportunity and Aggregate Economic Performance

By Katharine Bradbury and Robert K. Triest

Economists have developed an extensive literature examining the relationships between inequality of outcomes and growth, but few research papers have investigated the relationship between inequality of opportunity and growth. That extensive literature finds both positive and negative effects of inequality on growth, as theory predicts. By contrast, inequality of opportunity should be a drag on growth, as it represents less than full utilization of potential resources. Using recently released data on intergenerational mobility in commuting zones within the United States, this paper investigates the relationship between intergenerational mobility measures (as indicators of inequality of opportunity) and economic growth and finds that local areas with higher intergenerational mobility display faster economic growth over the 2000–2013 and 2007–2013 periods. This is true when intergenerational mobility is measured in both relative and, especially, absolute terms. In the reverse direction, the paper provides suggestive evidence that faster growth enhances economic opportunity.