Chapter 4: Frontiers of Poverty Measurement
work has moved from evaluations of inequality across all people to measures of inequality across groups of people, with the goal of isolating forms of inequality that are particularly objectionable or policy relevant. Roemer (1998) divides identity variables into circumstances, which are unrelated to actions taken by the person and hence the person is not accountable for such circumstances, and efforts, which are under the person’s control. He argues that inequality across groups of people defined by circumstances is particularly objectionable. For example, income inequality across racial groups or across groups defined by the education levels of one’s parents should be of special concern because it reflects an underlying inequality of opportunity. Ferreira and Gignoux (2008) implement this approach by applying Theil’s second inequality measure, or the mean log deviation, to a smoothed distribution defined by replacing each income in a group with the group mean. In other words, inequality of opportunity is measured as a between-group inequality term. This general approach can be applied for different circumstance variables, and hence ways of defining groups, to obtain different inequality of opportunity measures conditional on that choice. Stewart (2002) contends that group inequalities, which she calls horizontal inequalities, can be more important than overall or vertical inequalities. But rather than invoking a normative notion of equal opportunity, she uses an empirical argument: horizontal inequalities, such as those across ethnic groups, tend to be more closely linked to conflict than are vertical inequalities. Stewart emphasizes that many possible dimensions of achievements could be evaluated. The horizontal inequalities in a given dimension for a configuration of groups can be measured and monitored using the associated between-group inequality term. The World Bank’s Human Opportunity Index (HOI) is another group inequality measure that uses an opportunity interpretation of group inequalities. Here the focus is on the provision of social services, so the underlying distribution is taken to be dichotomous, with a zero being posted for all people without access to the service and a one for those having access. The overall mean of this variable then corresponds to the coverage rate for the social service. The aim is to go beyond the mean coverage to account for differential coverage rates across population subgroups, where the groups are defined using circumstantial variables. An inequality measure is applied to the smoothed distribution (which replaces a person’s actual value with the group’s coverage rate) to obtain a measure of inequality of opportunity.
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