Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/161268
Authors: 
Lefranc, Arnaud
Trannoy, Alain
Year of Publication: 
2017
Series/Report no.: 
IZA Discussion Papers 10645
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.
Subjects: 
equality of opportunity
effort
luck
timeline
moral hazard
reward
JEL: 
D63
J62
C14
Document Type: 
Working Paper

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