Morally Arbitrary Economic Advantage (Thomas Weisskopf Festschrift Conference Paper)
Frank Thompson | 5/24/2013

Frank Thompson considers the extent to which people throughout the globe experience economic advantages or disadvantages strictly due to where they happened to be born. Drawing from John Rawls, Thompson explains that “there are some properties of each human individual that are not (or not at all easily) mutable by that individual but which …confer advantages or disadvantages on that individual.” Working within a standard neoclassical Solow growth model, Thompson utilizes data on 80 countries to measure how much a worker would earn in any given country, based on the capital and technology available in that country. In Thompson’s model, the greater the contribution of capital and technology in determining a worker’s wage level, the more that this worker’s wage is determined by morally arbitrary conditions. Thompson finds that, throughout the 80 countries in his data sample, these morally arbitrary factors are a more important determinant of the wages paid to workers than is human capital.

Thompson then analyzes the extent of inequality in the distribution of technology and physical capital across the 80 countries in his sample. He finds that “differences in capital/labor ratios and levels of technology account for far more of the differences in workers’ outcomes than their differences in human capital.” In other words, Thompson concludes that morally arbitrary factors are a major cause of income inequality throughout the globe.

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