In other words, almost one third of income disparities in the UK, and even just under fifty per cent in the US are contingent on external circumstances. The ZEW study is based on representative microdata from the Centre for Longitudinal Studies at University College London and from the United States Department of Labor.
Both longitudinal studies consider the socio-economic environment during childhood of the examined cohorts. The studies also address cognitive and non-cognitive skills, such as school performance, perception and memory as well as motivation, discipline, and interpersonal skills. The ZEW researchers assume that any achievements and behaviour patterns of children up until the age of 16 are attributable to external circumstances.
"The public debate about increasing income disparities shows that we are more willing to accept income disparities caused by diligence or laziness than by external circumstances," explains Professor Andreas Peichl, Head of the Research Group "International Distribution and Redistribution" at ZEW. The study by Andreas Peichl and his colleagues shows, however, that external circumstances are highly relevant for income disparities, if childhood experiences are considered. "This high proportion of 'unfair' inequality should make us reconsider our current educational, tax and transfer policy. Greater account must be taken of family background, and children from vulnerable groups must be given more support," concludes Peichl.
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