Father and Son: How unequal opportunities are in Korea?

The present paper proposes a method to decompose the observed socio-economic inequality into the part due to unequal opportunities and the part due to differential exercise of individual effort. The proposed method is applied to the data set constructed from the Korea Labor and Income Panel Studies for the period of 2003-2006, consisting of individuals who are male heads of household 30-55 years old. Among the many circumstance variables, which are beyond the control of individuals, we chose only one variable: father's level of education. We provide a range of estimates of the importance of this circumstance variable in accounting for education and income inequality in one of the East Asian miracle countries. Father's education is found to account for between 16 and 59 percent of education inequality, between 4 and 12% of wage inequality when the elasticity of labor supply is assumed to be equal to 0.06, and between 2 and 12% of income inequality under the same assumption.