circumstances over which individuals have no control. Addressing inequality of opportunity— the bad inequality—therefore has universal appeal regardless of any differences in political spectrum. Early empirical findings also show that inequality in opportunity has negative effects on income (Molina, Narayan, and Saavedra-Chanduví 2013).

This paper focuses on inequality of opportunity, particularly in labor markets, based on the idea that the ability of individuals to access labor markets and obtain jobs based on their skills and work experience (human capital), irrespective of their circumstances, is critical to economic mobility and the reduction of inequality. In the context of transition economies, the effect of market reform depended on whether the countries were able to reorganize the labor market into more efficient and fair labor allocation processes. The discussion in this paper is structured around the main concept that fairness in processes is determined by the underlying equality or inequality of opportunity in society. Specifically, the paper examines, first, the extent to which fairness—the role of skills and effort versus connections in obtaining job—is perceived to exist in such processes by people in South Caucasus; second, whether access to good jobs is determined by effort and choice or by circumstances independent of the control of individuals; and, third, the extent to which inequality in the access to basic human capital inputs affects inequality in obtaining good jobs.

The study finds that inequality of opportunity in labor markets is a serious issue among the countries of South Caucasus. The access to good jobs in South Caucasus is not only limited relative to other countries in Eastern Europe and Central Asia, but also circumstances beyond the efforts individuals may undertake—the unfair element—have a substantial impact on inequality in the access to good jobs. The paper also highlights that some parts of the unobserved inequality in labor markets appear to be associated with inequalities in gaining access to education and basic services during the formative stages of life.

# 2. Methodology

The data used in this paper are taken from the 2015–16 round of the Life in Transition Survey (2015 LiTS) carried out by the European Bank for Reconstruction and Development in collaboration with the World Bank. This round of the survey was conducted in 34 countries, mainly in Eastern Europe and Central Asia, but also including Cyprus, Germany, Greece, Italy, and Turkey, and covered around 51,000 households. This paper utilizes the household survey not only because of the rich questions on the socioeconomic background and labor market status of respondents, but also because of the extensive information on attitudinal perspectives and perceptions of the social, political, and economic situation in the countries.

The first part of the analysis is devoted to identifying how people perceive fairness in processes. A simple gauge of fairness in processes is the perceived role of hard work, effort, and skill as a means to achieve one’s goals in life and to gain access to success in life. This concept of fairness is contrasted with the elements of processes or social arrangements that may unfairly help 5