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THE MEASUREMENT OF INEQUALITY OF OPPORTUNITY:
THEORY AND AN APPLICATION TO LATIN AMERICA
by Francisco H. G. Ferreira*
The World Bank and IZA
and
Je´re´mie Gignoux
Paris School of Economics
Building on the existing literature, this paper constructs a simple scalar measure of inequality of
opportunity and applies it to six Latin American countries. The measure—which captures between-
group inequality when groups are defined exclusively on the basis of predetermined circumstances—is
shown to yield a lower-bound estimate of true inequality of opportunity. Absolute and relative versions
of the index are defined, and alternative parametric and non-parametric methods are employed to
generate robust estimates. In the application to Latin America, we find inequality of opportunity shares
ranging from one quarter to one half of total consumption inequality. An opportunity-deprivation
profile that identifies the worst-off types in each society is also formally defined, and described for the
same six countries. In three of them, 100 percent of the opportunity-deprived were found to be
indigenous or Afro-descendants.
JEL Codes: D31, D63, J62
Keywords: inequality of opportunity, Latin America
1. Introduction
Economic inequality—usually measured in terms of income or
consumption—is neither all bad nor all good. Most people view income gaps that
arise from the application of different levels of effort as less objectionable than
those that are due, say, to racial discrimination. Indeed, the distinction between
inequalities due to the exercise of individual responsibility on the one hand, and
those due to predetermined circumstances on the other, has become central to the
Note: We are grateful to Caridad Araujo, Pranab Bardhan, Ricardo Paes de Barros, Marc
Fleurbaey, James Foster, Markus Goldstein, Stephen Jenkins, Peter Lanjouw, Marta Menéndez, Vito
Peragine, John Roemer, Jaime Saavedra, and three anonymous referees for helpful comments on earlier
drafts. Insightful comments were also received at conferences or seminars at the World Bank, the IDB,
the Brookings Institution, Cornell University, the Catholic University of Milan, Universidad de los
Andes in Bogotá, Colégio de México, Universidad Torcuato di Tella in Buenos Aires, and the Uni-
versities of Essex, London, Lund, Manchester, and Oxford. We also thank Carlos Becerra, Jofre
Calderón, and Leo Gasparini for kindly providing us with access to data. The views expressed in the
paper are those of the authors, and should not be attributed to the World Bank, their Executive
Directors, or the countries they represent.
*Correspondence to: Francisco H. G. Ferreira, The World Bank, 1818 H Street NW, Washington,
DC 20433, USA (fferreira@worldbank.org).
Review of Income and Wealth 2011
DOI: 10.1111/j.1475-4991.2011.00467.x
© 2011 The Authors
Review of Income and Wealth © 2011 International Association for Research in Income and Wealth
Published by Blackwell Publishing, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main St,
Malden, MA, 02148, USA.
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