Measuring Inequality of Opportunity in Asia and the Pacific

This paper aims to contribute to an understanding of the extent, nature and persistence of unfair inequality in the Asia Pacific region, building on a rich literature on the measurement of inequality of opportunity (IOp). As part of a project to build a global database of IOp, the paper uses microdata from 39 nationally representative household surveys to present IOp estimates for 14 countries that account for about three-quarters of the region’s population. We use consistent data protocols to ensure a high degree of cross-country comparability of IOp estimates. A distinguishing feature of the exercise is the use of machine learning methods to construct IOp estimates, which efficiently balances the risks of potential under- or over-fitting. The results show that, on average, nearly two-fifths of income or consumption inequality across the Asia-Pacific region represents inequality of opportunity attributable to inherited circumstances, though with wide variation across countries, ranging from about a quarter to over half. The cross-country variation in IOp is consistent with a Great Gatsby curve for the Asia-Pacific. A decomposition analysis assesses the relative contributions of different circumstances to IOp.