Equality of Opportunity Theory and Evidence

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent. This paper is a product of the Office of the Chief Economist, Africa Region. It is part of a larger effort by the World Bank to provide open access to its research and make a contribution to development policy discussions around the world. Building on earlier work by political philosophers, economists have recently sought to define a concept of equity that accommodates the fairness of reward to individual responsibility and effort, while allowing for the existence of some inequalities which are unfair and should be compensated. This paper—commissioned as a chapter for the Oxford Handbook of Well Being and Public Policy—provides a critical review of the economic literature on equality and inequality of opportunity. A simple 'canonical model' of equal opportunity is proposed, and used to explore the two fundamental concepts in this (relatively) new theory of social justice: the principles of compensation and reward. Ex-ante and ex-post versions of the compensation principle are presented, and the tensions between them are discussed. Different approaches to the measurement of inequality of opportunity—and empirical applications—are reviewed, and implications for the measurement of poverty and of the rate of economic development are discussed. 1 This paper was commissioned as a chapter for the Oxford Handbook of Well-Being and Public Policy (eds., M. Adler and M. Fleurbaey). We are grateful to Matthew Adler and Marc Fleurbaey for their comments and advise on earlier drafts of the paper. We also thank participants at workshops and seminars in Florence, Luxemburg, Pescara, Paris and Princeton for comments. We are solely responsible for any remaining errors. 2 Francisco Ferreira ([email protected]) is with the World Bank and IZA. Vito Peragine ([email protected]) is at the University of Bari.