Estimating Inequality of Opportunity in More Periods Than Ever Before: The Capital Income Approach

The measurement of Inequality of Opportunity has attracted a lot of attention in recent years, despite of the fact that it is very limited by the scarce availability of data on family background. In this paper we propose a method to overcome this limitation, which consists of using another variable, widely available, as a proxy of socioeconomic origin: capital income. Using data of 24 European countries we first show that capital income is strongly related to parental education and occupation. Secondly, we compare the results of our approach to estimate Inequality of Opportunity (which includes a measure of capital income in the set of circumstances) to those obtained with a “standard” procedure (i.e., including parental education in the circumstances set), and conclude that our method can be employed when we do not have information on parental background. Finally, we apply it to estimate Inequality of Opportunity for the full length of the EU-SILC database, which covers every year from 2003 to 2015. To the best of our knowledge, this method allows to measure Inequality of Opportunity in more countries and periods than ever before.