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Parallel Session 4: Poverty and Inequality of Opportunity

Peter Lanjouw's picture

Recent years have seen growing attention to inequality of opportunity and how processes of economic development are shaped by, and in turn shape, such inequalities.  One strand of research has been concerned with the development of methods to quantify the extent of inequality of opportunity as well as the impact of interventions and policies on such inequalities. I am organizing a parallel session on May 30 as part of the ABCDE conference that will present three studies that aim to substantially extend  this measurement agenda. 

A paper by Dirk van der Gaer will describe recent research that proposes a methodology to evaluate social projects from an equality of opportunity perspective.  The approach looks at the effect of a social program on the distribution of outcomes conditional on morally irrelevant characteristics (such as education level and indigenous background).  The methodology is applied to evaluate the effects of Mexico’s opportunidades program on children’s health outcomes. 

I will describe recent research that builds on the close connection between equality of opportunity and income mobility. For example, evidence of a failure to move up or down the income distribution by population groups defined in terms of morally irrelevant characteristics is suggestive of a degree of inequality of opportunity.  The analysis of such mobility has been limited in many countries due to the lack of panel data, however. My paper considers a method whereby repeated cross-sections of household survey data can be analyzed in such a way as to allow inferences to be made about movements up or down the income distribution over time.  This method for producing pseudo panels at best offers insights into approximate bounds of mobility but, under ideal circumstances, these can be narrow enough to yield useful insights.  The method is tested by sampling repeated cross-sections from genuine panel data sets for Vietnam and Indonesia and comparing the method's estimates to true panel estimates.

Finally, Francisco Ferreira will report on a study that introduces a method to incorporate concerns about inequality of opportunity into the measurement of poverty.  Many poverty indices are designed purposefully so as to be sensitive to inequality among the poor.  However, despite a well-recognized distinction between inequality of outcomes and inequality of opportunity there is no analogous poverty measure that is sensitive specifically to inequality of opportunity.  The authors axiomatically characterize a class of opportunity-sensitive poverty measures and study Brazil’s poverty dynamics on the basis of one member of this class.  They illustrate that their opportunity-sensitive measure of poverty evolves quite differently from standard measures of poverty. (Don’t miss Francisco’s blog about the impact of the 2006 World Development Report on Equity and Development, which he led along with Michael Walton.)
 

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