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Upward and downward bias when measuring inequality of opportunity

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  • Paolo Brunori

    (Dipartimento di Scienze per l'Economia e l'Impresa)

  • Vito Peragine
  • Laura Serlenga

Abstract

We show that, when measuring inequality of opportunity with survey data, scholars face two types of biases. A well-known downward-bias, due to partial observability of cir- cumstances that affect individual outcome, and an upward bias, which is the consequence of sampling variance. The magnitude of the latter distortion depends on both the empirical strategy used and the observed sample. We suggest that, although usually neglected in em- pirical contributions, the upward bias may be significant. We propose a simple criterion to select the best specification which balances between the two sources of bias. Our method is based on cross validation and can be easily implemented to survey data. In order to show how this method can improve our understanding of the inequality of opportunity measure- ment, we provide an empirical illustration based on income data of 26 European countries. Our evidence shows that estimates of inequality of opportunity are extremely sensitive to model selection. Alternative specifications lead to significant differences in the absolute level of inequality of opportunity and to a number of substantial countries’ re-ranking. This in turn clarifies the need of an objective criterion to select the best econometric model when measuring inequality of opportunity.

Suggested Citation

  • Paolo Brunori & Vito Peragine & Laura Serlenga, 2017. "Upward and downward bias when measuring inequality of opportunity," Working Papers - Economics wp2017_02.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
  • Handle: RePEc:frz:wpaper:wp2017_02.rdf
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    Cited by:

    1. Paul Hufe & Andreas Peichl, 2020. "Beyond Equal Rights: Equality of Opportunity in Political Participation," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 66(3), pages 477-511, September.
    2. Juan C. Palomino & Gustavo A. Marrero & Juan G. Rodríguez, 2019. "Channels of Inequality of Opportunity: The Role of Education and Occupation in Europe," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 143(3), pages 1045-1074, June.
    3. Yang, Xiuna & Gustafsson, Björn Anders & Sicular, Terry, 2021. "Inequality of Opportunity in Household Income, China 2002-2018," IZA Discussion Papers 14463, Institute of Labor Economics (IZA).
    4. Brunori, Paolo & Ferreira, Francisco H. G. & Peragine, Vito, 2021. "Prioritarianism and equality of opportunity," LSE Research Online Documents on Economics 108868, London School of Economics and Political Science, LSE Library.
    5. Paolo Brunori & Alain Trannoy & Caterina Francesca Guidi, 2021. "Ranking populations in terms of inequality of health opportunity: A flexible latent type approach," Health Economics, John Wiley & Sons, Ltd., vol. 30(2), pages 358-383, February.
    6. Paolo BRUNORI, & Guido NEIDHOEFER, 2020. "The Evolution of Inequality of Opportunity in Germany: A Machine Learning Approach," Working Papers - Economics wp2020_02.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    7. Ibragimova, Zulfiya & Frants, Marina, 2021. "Measuring income opportunity inequality: A structural review and meta-analysis," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 61, pages 89-109.
    8. Brunori, Paolo & Hufe, Paul & Mahler, Daniel Gerszon, 2021. "The Roots of Inequality: Estimating Inequality of Opportunity from Regression Trees and Forests," IZA Discussion Papers 14689, Institute of Labor Economics (IZA).
    9. Vincenzo Carrieri & Apostolos Davillas & Andrew M. Jones, 2020. "A latent class approach to inequity in health using biomarker data," Health Economics, John Wiley & Sons, Ltd., vol. 29(7), pages 808-826, July.
    10. Xavier Ramos & Dirk Van de gaer, 2021. "Is Inequality of Opportunity Robust to the Measurement Approach?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 67(1), pages 18-36, March.
    11. 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.
    12. Leonardo Gasparini & Irene Brambilla & Andrés César & Guillermo Falcone & Carlo Lombardo, 2020. "The Risk of Automation in Argentina," CEDLAS, Working Papers 0260, CEDLAS, Universidad Nacional de La Plata.
    13. Rafael Carranza, 2020. "Upper and lower bound estimates of inequality of opportunity: A cross-national comparison for Europe," Working Papers 511, ECINEQ, Society for the Study of Economic Inequality.
    14. Toshiaki Aizawa, 2020. "Trajectory of inequality of opportunity in child height growth: Evidence from the Young Lives study," Demographic Research, Max Planck Institute for Demographic Research, Rostock, Germany, vol. 42(7), pages 165-202.
    15. Yuzhakov, Vladimir (Южаков, Владимир) & Dobrolyubova, Elena (Добролюбова, Елена) & Alexandrov, Oleg (Александров, Олег) & Klochkova, E (Клочкова, Е.), 2015. "Improving the Efficiency of the Public Service and Optimization of the Number of its Personnel Structure [Повышение Эффективности Государственной Службы И Оптимизация Численности Ее Кадрового Соста," Published Papers mn36, Russian Presidential Academy of National Economy and Public Administration.
    16. Monroy-Gómez-Franco, Luis & Vélez-Grajales, Roberto & Yalonetzky, Gastón, 2021. "Layers of inequality: Unequal opportunities and skin colour in Mexico," MPRA Paper 106605, University Library of Munich, Germany.
    17. Dai, Xinchen & Li, Jing, 2021. "Inequality of opportunity in China: Evidence from pseudo panel data," China Economic Review, Elsevier, vol. 68(C).
    18. Leopoldo Cabrera & Gustavo A. Marrero & Juan Gabriel Rodríguez & Pedro Salas-Rojo, 2021. "Inequality of Opportunity in Spain: New Insights from New Data," Hacienda Pública Española / Review of Public Economics, IEF, vol. 237(2), pages 153-185, June.

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    More about this item

    Keywords

    inequality of opportunity; model selection; variance-bias trade-off;
    All these keywords.

    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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