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Upward and downward bias when measuring inequality of opportunity

Author

Listed:
  • Paolo Brunori

    () (Università degli Studi di Bari "Aldo Moro")

  • Vito Peragine

    () (Università degli Studi di Bari "Aldo Moro")

  • Laura Serlenga

    () (Università degli Studi di Bari "Aldo Moro")

Abstract

We show that, when measuring inequality of opportunity with survey data, scholars incur two types of biases. A well-known downward-bias, due to partial observability of circumstances that affect individual outcome, and an upward bias, which depends on the econometric method used and the quality of the available data. We suggest a simple criterion to balance between the two sources of bias based on cross validation. An empirical application, based on 26 European countries, shows the usefulness of our method.

Suggested Citation

  • Paolo Brunori & Vito Peragine & Laura Serlenga, 2016. "Upward and downward bias when measuring inequality of opportunity," SERIES 05-2016, Dipartimento di Economia e Finanza - Università degli Studi di Bari "Aldo Moro", revised Sep 2016.
  • Handle: RePEc:bai:series:series_wp_05-2016
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    References listed on IDEAS

    as
    1. Brunori, Paolo & Ferreira, Francisco H. G. & Peragine, Vito, 2013. "Inequality of opportunity, income inequality and economic mobility : some international comparisons," Policy Research Working Paper Series 6304, The World Bank.
    2. Florian Wendelspiess Chávez Juárez, 2015. "Measuring Inequality of Opportunity with Latent Variables," Journal of Human Development and Capabilities, Taylor & Francis Journals, vol. 16(1), pages 106-121, February.
    3. Balcázar, Carlos Felipe, 2015. "Lower bounds on inequality of opportunity and measurement error," Economics Letters, Elsevier, vol. 137(C), pages 102-105.
    4. Francisco H. G. Ferreira & Jérémie Gignoux, 2011. "The Measurement Of Inequality Of Opportunity: Theory And An Application To Latin America," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 57(4), pages 622-657, December.
    5. repec:spr:sochwe:v:49:y:2017:i:3:d:10.1007_s00355-017-1044-x is not listed on IDEAS
    6. Hufe, Paul & Peichl, Andreas, 2015. "Lower Bounds and the Linearity Assumption in Parametric Estimations of Inequality of Opportunity," IZA Discussion Papers 9605, Institute for the Study of Labor (IZA).
    7. Judith Niehues & Andreas Peichl, 2014. "Upper bounds of inequality of opportunity: theory and evidence for Germany and the US," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 43(1), pages 73-99, June.
    8. Paolo Brunori & Flaviana Palmisano & Vito Peragine, 2015. "Inequality of Opportunity in Sub-Saharan Africa," SERIES 08-2015, Dipartimento di Economia e Finanza - Università degli Studi di Bari "Aldo Moro", revised Dec 2015.
    9. Anders Björklund & Markus Jäntti & John Roemer, 2012. "Equality of opportunity and the distribution of long-run income in Sweden," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 39(2), pages 675-696, July.
    10. Paul Hufe & Andreas Peichl & John Roemer & Martin Ungerer, 2017. "Inequality of income acquisition: the role of childhood circumstances," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 49(3), pages 499-544, December.
    11. Paolo Li Donni & Juan Rodríguez & Pedro Rosa Dias, 2015. "Empirical definition of social types in the analysis of inequality of opportunity: a latent classes approach," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 44(3), pages 673-701, March.
    12. Francisco H.G. Ferreira & Jérémie Gignoux, 2011. "The Measurement of Inequality of Inequality of Opportunity: Theory and an Application to Latin America," Post-Print halshs-00754503, HAL.
    13. Gustavo A. Marrero & Juan Gabriel Rodríguez, 2012. "Inequality of Opportunity in Europe," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 58(4), pages 597-621, December.
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    Citations

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    Cited by:

    1. Paolo Brunori & Paul Hufe & Daniel Gerszon Mahler, 2017. "The Roots of Inequality: Estimating Inequality of Opportunity from Regression Trees," Working Papers - Economics wp2017_18.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    2. Xavier Ramos Dirk Van de gaer & Dirk Van de gaer, 2017. "Is inequality of opportunity robust to the measurement approach?," Working Papers 450, ECINEQ, Society for the Study of Economic Inequality.

    More about this item

    Keywords

    Inequality of opportunity; model selection; variance-bias trade-off;

    JEL classification:

    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • D3 - Microeconomics - - Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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