Equality of opportunity: a probabilistic approach

Zusammenfassung

Modern economic theory of justice recognizes that individual�s outcome is a function of effort and circumstances. The measurement of equality of opportunity deals with those inequalities of outcome due to differential circumstances. Standard approaches assume an a priori division of individuals into types of circumstances. However, this assumption may be inadequate if some unobserved circumstances like talent or luck are significant. We propose a probabilistic model that considers this uncertainty about the true partitioning of the population. In fact, the standard equality of opportunity model can be seen as a particular case of our model when the probabilities of belonging to a type are fixed (to one or zero). We propose the finite mixture technique as the method to estimate this model.