Chapter 2 The Implication of Partial Observability of Circumstances on the Measurement of IOp

Purpose – The aim of this chapter is to analyze the measurement error due to partial observability of circumstances, given the current methodologies used to capture the inequality of opportunity. Methodology – We limit our analysis to the case in which IOp is measured by using an inequality index and evaluated according to the ex ante and the ex post approaches proposed by Checchi and Peragine (2010). Both approaches rely on the use of two hypothetical distributions obtained by standardizing and smoothing processes so that in one of them all inequalities are due to effort and in the other they are all caused by individuals circumstances. The impact of a change in the observability of circumstances has been analyzed directly in the first case (ex ante approach) and indirectly in the second (ex post approach). Hence, in the latter results are obtained by using a decomposable inequality index, while in the first case the result holds for any Lorenz consistent inequality index. Findings – We have shown that, in both cases, we can only identify a lower bound of opportunity inequality, and the results obtained when measuring IOp with the two approaches are biased in the same direction. Originality – The idea that inequality of opportunity, as it is generally measured, is only a lower bound of the real inequality of opportunity has already been hinted in Peragine (2004a), Fleurbaey (2008, Chap. 9), and Ferreira and Gignoux (2011). We attempt to bring this intuition to complete fruition in this chapter by providing clear and distinct demonstrations of this result for both the ex ante and the ex post approach for measuring IOp.