I am looking for the methodology which can be used to estimate the inequality of opportunity using household level data.
A comparison of unequal situation in generation 1 while equality of opportunity in generation 2. Then, a common tool for inequality of opporunity.
Let's say you get two kids.
Kid A has parents who make $75,000 a year, for pre-tax income of $150,000, or about $50,000 per person.
Kid B has a single parents who earns $20,000 a year, for pre-tax income of about $10,000 per person to cover all costs.
This is inequality of outcome.
Let's imagine that their kids both attend public school, where they both participate in sports teams at school and they both participate in the school band (someone gave kid B a clarinet to play).
Neither child receives extra tutoring outside of school. Kid A usually gets an average of 5 minutes supervision from each parent every day when. Kid B's parent is at work when kid A comes up from school, so his dad always makes him show his homework in the evening and helps kid B if he can.
Let's imagine that kid A and kid B both graduate high school with similar marks and extracurricular records. Then they apply to similar programs at similar quality of schools, obtain similarly remarkable girlfriends, and both get pretty decent jobs.
Both of them earn $75,000 a year within 5 years of completing university.
That would be equality of opportunity, despite the highly unequal distribution of income in the previous generation.
The most common measure of inequality of opportunity is intergeneration income mobility. This can be demonstrated with a 5x5 table showing percentages moving between quintile groups bewteen the first and second generation. For example, 1st quintile in first generation, then which percentage end up in each quintile in the second generation.
It's easy. It's visual (almost). But probably your data is not quite comparable. But its a distribution, so we can only assume that costs have increased equally for all income groups unless we have a whole lot more information, time/money, etc.
For formal measures of inequality of opportunity based on household data you should look up work by Francisco Ferreira at the World Bank and co-authors. They operationalize John Roemer's approach to the question.
Dear Masood,
An interesting review of both the concept of inequality of opportunities and different methodological approaches to measure it can be found at:
Pignataro, G. (2012), "Equality of opportunity: Policy and Measurement paradigms", Journal of Economic Surveys, Vol. 26, No. 5, pp. 800–834.
You can find it at:
doi: 10.1111/j.1467-6419.2011.00679.x
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