Can we measure inequality of opportunity? The World Bank has a go.

December 6, 2008 Off By admin

The World Bank has come up with a ‘Human Opportunity Index’ which pulls together in a single composite indicator both how many opportunities (e.g. overall access to primary education, clean water etc) are available in a given country or region, and how equitably those opportunities are distributed between rich and poor. The idea is to come up with an equivalent of the gini index (which measures economic inequality, for example of income or wealth), but one that measures inequality of opportunity – the disparities between the kinds of start in life that children of different groups can expect. Essentially they’re putting a number on the degree to which the ‘lottery of birth’ will determine a person’s life chances.

Access to healthcare, education etc in childhood have a life-long influence on people’s fortunes, but how important is that influence? As well as coming up with an HOI figure, the Bank compares inequality of opportunity with overall economic inequality, to estimate the share of current inequality of outcomes that can be explained by circumstances that are beyond the control of the individual.

Applying the new tool to Latin America, historically the most unequal region in the world, the Bank used five basic opportunity variables: completing sixth grade on time; school attendance at ages 10–14, and access to water, sanitation, and electricity. Across the different opportunities considered, Argentina, Chile, Costa Rica, Uruguay, and Venezuela (please note, Chavez critics) have the fairest access to opportunity. Guatemala, Honduras, and Nicaragua score lowest, both because of low coverage and because the existing coverage is not equitably distributed.

Across a sample of countries of the region, the Bank estimates that between one-half and one-quarter of current inequality of consumption reflects inequality of opportunity. It’s not obvious what the rest is down to – perhaps individual effort, luck etc.

So what? Like all good indices, the HOI could provide a tool to help governments and others allocate resources in order to reduce inequality, balancing the need for overall provision with the need for equity, and highlighting which kinds of services are most/least unequal.

The Bank always seems at its most progressive when discussing Latin America. Here for example it proclaims ‘In a region characterized by pervasive and untamed inequality of income, and where groups of the population remain excluded from socioeconomic progress, a shift in the debate toward equality of opportunities promises to be a better guide for public policy.’ Stirring stuff.

However in focussing on equality of opportunities, the Bank opts for the least politically painful route to redistribution – From Poverty to Power argues that redistribution of power itself, and assets (eg via progressive tax reforms) are at least as important. Absent those, the technocratic efforts to redistribute opportunity may not get very far.