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Mobility and Meritocracy

LABOR June 2007. Mobility and Meritocracy. A B Atkinson, Nuffield College, Oxford. Meritocracy as a political objective Mobility seen as key to meritocracy Concern (in UK) that becoming less mobile and meritocratic. Why?. How?. True?. Amartya Sen:

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Mobility and Meritocracy

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  1. LABOR June 2007 Mobility and Meritocracy A B Atkinson, Nuffield College, Oxford

  2. Meritocracy as a political objective • Mobility seen as key to meritocracy • Concern (in UK) that becoming less mobile and meritocratic Why? How? True?

  3. Amartya Sen: • “The idea of meritocracy may have many virtues, but clarity is not one of them”. • Instrumental: “the incentive view of merit is underdefined, since it is dependent on the preferred view of a good society” • Intrinsic: “quality of such actions, judged in a result-independent way”.

  4. How relate to standard welfare economics? Trade-off between equity and efficiency embodied in Social Welfare Function based on individual welfares. Mirrlees model: Assume wage rate = marginal product = ability Net earnings E = Aℓ – T(Aℓ) where A denotes ability and ℓ = effort/hours (leave effort on one side ℓ = 1). SWF W ≡ ∑i V(Ai-Ti) Where does meritocracy come in?

  5. Roland Bénabou: • Two-dimensional measure of meritocracy: • Assignment based on talent rather than background • Extent to which reward is based on talent Taken for granted in Mirrlees model

  6. Assignment Model (Mayer, RE Stat 1960) • Self-employed produce A • Entrepreneur employs (λ-1) people, generating profit λA-w-c • Workers receive wage depending on match • w = w0+(1-θ)λA • Workers decide on basis of E{w}

  7. If all A ≥ A* are entrepreneurs, and distribution has a Pareto tail, then E{A} = hA* (h > 1) determines Ao such that all with A ≤ Ao are workers. Entrepreneurs Assignment Self-employed Workers E{w} Ability Ao A* Reward

  8. Et = αAt + βEt-1 + εt What to do with mobility?

  9. Mobility between and within generations AF EF eF AS ES eS r(ES , EF) or r(eS, eF) or r(Es, eF) ? Depends on mechanisms

  10. Relation with economic model (demand side) Assignment model without self employment and λ=2 (set median A = 1) With random assignment, output = 2; With perfect meritocracy, output = 2h > 2.; With β inheriting position, output = 2h - 2β[h(1-γ)-1] where γ is the degree of heritability of ability

  11. Inter-generational mobility in the UK NCDS (born 1958): total income of parents in 1974 and earnings of sons in 1991 BCS (born 1970): total income of parents in 1986 and earnings of sons in 2000 “We see sharp falls in cross-generational mobility of economic status between the cohorts” (Blanden, Goodman, Gregg and Machin).

  12. York 1950-1975-8 and NCDS 1974 and 1991/9 • special sample (York) • small sample size (287) • not a cohort • Compare elasticity for men (age adjusted earnings) • York (Atkinson et al) 0.418 (0.097) • NCDS (Jäntti et al) 0.359 (0.03)

  13. Conclusions • Need to clarify meaning of meritocracy • Need model of labour market that separates different elements • Relation to mobility is complex • Intergenerational mobility in UK either ∩ or

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