Upper and lower bound estimates of inequality of opportunity

Working Paper 2020-511

Abstract

I provide lower and upper bound estimates of inequality of opportunity (IOp) for 24 European countries, between 2005 and 2011. Previous estimates of IOp are lower bounds of its true level and provide a partial view of the importance of involuntarily inherited factors. Upper bound estimates of IOp are much larger than their corresponding lower bound estimates. While the lower bound estimates of IOp account for up to 31% of total inequality, the upper bound estimates account for up to 90.5%, suggesting that IOp can be as high as total inequality of outcomes. Indeed, inequality of outcomes has a higher correlation with the upper bound estimates of IOp than with the lower bound estimates, both cross sectionally and over time.

Authors: Rafael Carranza.

Keywords: Circumstances, equality of opportunity, equivalized household income, inequality, MLD index, upper bound estimate.
JEL: D63.