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IZA Discussion Paper No. 9605
December 2015
Lower Bounds and the Linearity Assumption in Parametric Estimations of Inequality of Opportunity

The consistent underestimation of inequality of opportunity has led some scholars to call into question the usefulness of such estimates. In this paper we argue that neglecting heterogeneity in the influence of circumstances across types as well as neglecting heterogeneity in type-specific effort distributions are two important sources of the downward bias in inequality of opportunity measures. Compared to the standard parametric approach of ex ante measurement of inequality of opportunity, we calculate a 50% upwards correction when accounting for both sources of heterogeneity. Therefore, taking heterogeneity across types seriously is an important step towards strengthening the policy relevance of this concept.

Kommunikation
Mark Fallak
mark.fallak@liser.lu
+352 585-855-526
World of Labour
Olga Nottmeyer
olga.nottmeyer@liser.lu
+352 585-855-501
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Christina Gathmann
christina.gathmann@liser.lu

Das IZA@LISER-Netzwerk ist eine weltweite Gemeinschaft für exzellente Forschung in der Arbeitsmarktökonomie und angrenzenden Fachgebieten. Nach dem Wechsel von Bonn wird das Netzwerk nun am Luxembourg Institute of Socio-Economic Research (LISER) koordiniert.

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