Empirical definition of social types in the analysis of inequality of opportunity: a latent classes approach

Abstract

The empirical analysis of inequality of opportunity centres on disparities between social types, defined by the exposure to circumstances beyond individual control. Despite this, its main theoretical foundation-the Roemer model-does not indicate how to carry out, in practice, the required partition of the population into such types. This paper operationalises this definition of social types using a latent classes approach. Our specification is embedded in a probabilistic extension of the canonical Roemer model, which assumes that the relevant population consists of a finite number of latent types, from which each individual can be treated as a random draw. This makes possible the use of the full set of circumstances in the data, allows for unobserved individual heterogeneity and does not require an ex-ante specification of the number of types by the researcher. Our approach is illustrated by an empirical application featuring a large UK cohort study that was used in earlier literature to examine inequalities of opportunity in a wide array of social outcomes.

The Roots of Inequality: Estimating Inequality of Opportunity from Regression Trees

“…Lastly, we compare our estimates against the latent class approach as proposed by Li Donni et al (2015). The eligible set of circumstances is the full set of observable circumstances,Ω.…”

“…The eligible set of circumstances is the full set of observable circumstances,Ω. We follow Li Donni et al (2015) in using Schwartz's Bayesian Information Criterion (BIC) to select the most adequate number of latent types. Of all methods under consideration the parametric approach delivers the highest estimates.…”

“…In analogy to this paper, Li Donni et al (2015) have discussed the issue of ad-hoc model selections in the empirical literature on equality of opportunity. To resolve this issue, they propose a data-driven type partition by estimating a latent class model.…”

Approaches to Inequality of Opportunity: Principles, Measures and Evidence

“…In such cases, the proposal made in Li Donni et al . (), to use a latent class technique that endogenously determines the types (and number of types), can provide a way out for non‐parametric methodologies. Second, the above problem is even more severe when (some) circumstances are continuous variables.…”

Inequality of opportunity in health: A decomposition‐based approach

“…We follow the traditional approach in the IOp literature based on the a priori selection of the types according to the circumstances variables. Recently, LiDonni et al (2015) proposed a more data-oriented approach for the definition of social types based on the estimation of latent class models.4 This ethical stance is open to dispute. For example,Jusot et al (2013) propose empirical methods to compare the Roemer view with two more libertarian perspectives: first, that individual efforts should be fully respected whatever the influence of circumstances on those efforts; second, that regards the efforts of earlier generations, especially parents, to improve outcomes for their offspring as legitimate.…”