Biases in inequality of opportunity estimates: measures and solutions

Moramarco, Domenico, Brunori, Paolo ORCID: 0000-0002-1624-905X and Salas Rojo, Pedro ORCID: 0000-0002-8763-8909 (2024) Biases in inequality of opportunity estimates: measures and solutions. III Working Paper (145). International Inequalities Institute, London School of Economics and Political Science, London, UK.

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Abstract

In this paper we discuss some limitations of using survey data to measure inequality of opportunity. First, we highlight a link between the two fundamental principles of the theory of equal opportunities – compensation and reward – and the concepts of power and confidence levels in hypothesis testing. This connection can be used to address, for example, whether a sample has sufficient observations to appropriately measure inequality of opportunity. Second, we propose a set of tools to normatively assess inequality of opportunity estimates in any type partition. We apply our proposal to Conditional Inference Trees, a machine learning technique that has received growing attention in the literature. Finally, guided by such tools, we suggest that standard tree-based partitions can be manipulated to reduce the risk of compensation and reward principles. Our methodological contribution is complemented with an application using a quasi-administrative sample of Italian PhD graduates. We find a substantial level of labor income inequality among two cohorts of PhD graduates (2012 and 2014), with a significant portion explained by circumstances beyond their control.

Item Type:	Monograph (Working Paper)
Additional Information:	© 2024 The Authors
Divisions:	International Inequalities Institute
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HB Economic Theory
JEL classification:	C - Mathematical and Quantitative Methods > C3 - Econometric Methods: Multiple; Simultaneous Equation Models; Multiple Variables; Endogenous Regressors > C30 - General D - Microeconomics > D3 - Distribution > D31 - Personal Income, Wealth, and Their Distributions D - Microeconomics > D6 - Welfare Economics > D63 - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
Date Deposited:	18 Sep 2024 09:36
Last Modified:	01 Oct 2024 10:51
URI:	http://eprints.lse.ac.uk/id/eprint/125442

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