Publication: The Roots of Inequality: Estimating Inequality of Opportunity from Regression Trees
Loading...
Published
2018-02
ISSN
Date
2018-02-28
Author(s)
Editor(s)
Abstract
This paper proposes a set of new methods to estimate inequality of opportunity based on conditional inference regression trees. It illustrates how these methods represent a substantial improvement over existing empirical approaches to measure inequality of opportunity. First, the new methods minimize the risk of arbitrary and ad hoc model selection. Second, they provide a standardized way to trade off upward and downward biases in inequality of opportunity estimations. Finally, regression trees can be graphically represented; their structure is immediate to read and easy to understand. This will make the measurement of inequality of opportunity more easily comprehensible to a large audience. These advantages are illustrated by an empirical application based on the 2011 wave of the European Union Statistics on Income and Living Conditions.
Link to Data Set
Citation
“Brunori, Paolo; Hufe, Paul; Mahler, Daniel Gerszon. 2018. The Roots of Inequality: Estimating Inequality of Opportunity from Regression Trees. Policy Research Working Paper;No. 8349. © World Bank. http://hdl.handle.net/10986/29410 License: CC BY 3.0 IGO.”
Digital Object Identifier
Associated URLs
Associated content
Other publications in this report series
Publication The Macroeconomic Implications of Climate Change Impacts and Adaptation Options(Washington, DC: World Bank, 2025-05-29)Estimating the macroeconomic implications of climate change impacts and adaptation options is a topic of intense research. This paper presents a framework in the World Bank's macrostructural model to assess climate-related damages. This approach has been used in many Country Climate and Development Reports, a World Bank diagnostic that identifies priorities to ensure continued development in spite of climate change and climate policy objectives. The methodology captures a set of impact channels through which climate change affects the economy by (1) connecting a set of biophysical models to the macroeconomic model and (2) exploring a set of development and climate scenarios. The paper summarizes the results for five countries, highlighting the sources and magnitudes of their vulnerability --- with estimated gross domestic product losses in 2050 exceeding 10 percent of gross domestic product in some countries and scenarios, although only a small set of impact channels is included. The paper also presents estimates of the macroeconomic gains from sector-level adaptation interventions, considering their upfront costs and avoided climate impacts and finding significant net gross domestic product gains from adaptation opportunities identified in the Country Climate and Development Reports. Finally, the paper discusses the limits of current modeling approaches, and their complementarity with empirical approaches based on historical data series. The integrated modeling approach proposed in this paper can inform policymakers as they make proactive decisions on climate change adaptation and resilience.Publication South Africa’s Fragmented Cities: The Unequal Burden of Labor Market Frictions(Washington, DC: World Bank, 2026-01-08)Using high-resolution administrative, census, and satellite data, this paper shows that South African cities are characterized by spatial mismatches between where people live and where jobs are located, relative to 20 global peers. Areas within 5 kilometers of commercial centers have 9,300 fewer residents per square kilometer than expected, which is 60 percent below the global median. Poor, dense neighborhoods are most affected. In Johannesburg, a 10-percentile increase in distance from the nearest business hub corresponds to a 3.7-percentile drop in asset wealth (a proxy of household wellbeing) and 4.9-percentile drop in employment. In Cape Town, the declines are 4.0 and 3.7 percentiles, respectively. Employment is 87 percent lower in the poorest decile than the richest in Johannesburg and 61 percent lower in Cape Town. These findings suggest that South Africa’s spatial organization of people and economic activity constrains agglomeration and reinforces inequality. This methodology provides a scalable and standardized data-driven framework to analyze spatial accessibility and agglomeration frictions in complex, data-constrained urban systems.Publication The Evolution of Local Participatory Democracy in Nepal(Washington, DC: World Bank, 2025-11-05)Nepal is, according to its constitution, among the world’s most decentralized countries, with a long and complex tradition of local-level public participation. This paper traces the evolution of Nepal’s modern participatory institutions, examining the extent to which they are “induced” by external interventions versus being “organically” rooted in indigenous practices. The paper identifies three broad phases: an initial focus on participation in project implementation; a subsequent phase that expanded citizen engagement; and a third phase of citizen empowerment, culminating in the 2015 federal constitution, which granted unprecedented local autonomy. The analysis yields five key findings. First, over the past 50 years, successive reforms have progressively expanded opportunities for citizens to influence local decision-making. Second, these reforms have integrated traditional participatory mechanisms into formal institutions of local government. Third, although central-level initiatives exist, most participatory platforms continue to operate at the local level. Fourth, the federal constitution has created a new landscape of local democracy, embedding autonomy and accountability. Fifth, although they are still valued in many ethnic and territorial communities, traditional participatory practices are gradually disappearing. The paper concludes by offering policy recommendations to help donor agencies and governments strengthen Nepal’s democratic trajectory. It argues that effective interventions should build on Nepal’s deep participatory traditions while recognizing the constitutional reality of far-reaching local autonomy.Publication Institutional Capacity for Policy Implementation: An Analytical Framework(Washington, DC: World Bank, 2026-01-07)State capacity is an important prerequisite for policy implementation, yet at the country level it is difficult to measure, assess, and reform. This paper proposes a focus on institutional capacity: the ability of public institutions to implement the specific policy mandates for which they are responsible. Based on a review of existing literature, the paper defines the different dimensions that compose institutional capacity and groups them into two cross-cutting categories: organizational dimensions (personnel, financial resources, information systems, and management practices) and governance dimensions (transparency, independence, and accountability). The paper proposes measures for organizational and governance dimensions using existing data, shows intra-institutional variation of these measures within countries, and discusses how new data could be collected for better measurement of these concepts. Finally, the paper illustrates how the framework can be used to diagnose the sources of common problems related to weak policy implementation.Publication Closing the Gender Gap in Entrepreneurship: Overcoming Challenges in Law and Practice for Female Entrepreneurs(Washington, DC: World Bank, 2026-01-07)Despite significant strides toward gender equality, women around the world continue to encounter systemic obstacles that hinder their entrepreneurial success. This paper systematically reviews the literature on the barriers female entrepreneurs face and the solutions proposed to overcome these challenges. It discusses institutional factors, financial factors, human capital factors, and social and cultural factors. The literature overview is complemented by a series of stylized facts that illustrate how overcoming some of these existing barriers is correlated with improved women’s entrepreneurship and female labor force participation, drawing on the World Bank’s Women, Business and the Law database as well as the World Bank’s Enterprise Surveys. The findings underscore the need for creating an enabling environment where women can thrive as entrepreneurs.
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Inequality of Opportunity, Income Inequality and Economic Mobility : Some International Comparisons(World Bank, Washington, DC, 2013-01)Despite a recent surge in the number of studies attempting to measure inequality of opportunity in various countries, methodological differences have so far prevented meaningful international comparisons. This paper presents a comparison of ex-ante measures of inequality of economic opportunity (IEO) across 41 countries, and of the Human Opportunity Index (HOI) for 39 countries. It also examines international correlations between these indices and output per capita, income inequality, and intergenerational mobility. The analysis finds evidence of a "Kuznets curve" for inequality of opportunity, and finds that the IEO index is positively correlated with overall income inequality, and negatively with measures of intergenerational mobility, both in incomes and in years of schooling. The HOI is highly correlated with the Human Development Index, and its internal measure of inequality of opportunity yields very different country rankings from the IEO measure.Publication How Much Does Reducing Inequality Matter for Global Poverty?(World Bank, Washington, DC, 2019-05)The goals of ending extreme poverty by 2030 and working toward a more equal distribution of income are prominent in international development and agreed upon in the United Nations' Sustainable Development Goals 1 and 10. Using data from 164 countries comprising 97 percent of the world's population, this paper simulates a set of scenarios for global poverty from 2018 to 2030 under different assumptions about growth and inequality. This allows for quantifying the interdependence of the poverty and inequality goals. The paper uses different assumptions about growth incidence curves to model changes in inequality and relies on the Model-based Recursive Partitioning machine-learning algorithm to model how growth in GDP is passed through to growth as observed in household surveys. When holding within-country inequality unchanged and letting GDP per capita grow according to International Monetary Fund forecasts, the simulations suggest that the number of extreme poor (living below $1.90/day) will remain above 550 million in 2030, resulting in a global extreme poverty rate of 6.5 percent. If the Gini index in each country decreases by 1 percent per year, the global poverty rate could reduce to around 5.4 percent in 2030, equivalent to 100 million fewer people living in extreme poverty. Reducing each country's Gini index by 1 percent per year has a larger impact on global poverty than increasing each country's annual growth 1 percentage point above the forecasts, suggesting an important role for inequality on the path to eliminating extreme poverty.Publication How Much Does Reducing Inequality Matter for Global Poverty?(World Bank, Washington, DC, 2020-06-01)The goals of ending extreme poverty by 2030 and working towards a more equal distribution of incomes are part of the United Nations' Sustainable Development Goals. Using data from 166 countries comprising 97.5 percent of the world's population, we simulate scenarios for global poverty from 2019 to 2030 under various assumptions about growth and inequality. We use different assumptions about growth incidence curves to model changes in inequality, and rely on a machine-learning algorithm called model-based recursive partitioning to model how growth in GDP is passed through to growth as observed in household surveys. When holding within-country inequality unchanged and letting GDP per capita grow according to World Bank forecasts and historically observed growth rates, our simulations suggest that the number of extreme poor (living on less than 1.90 US Dollars/day) will remain above 600 million in 2030, resulting in a global extreme poverty rate of 7.4 percent. If the Gini index in each country decreases by 1 percent per year, the global poverty rate could reduce to around 6.3 percent in 2030, equivalent to 89 million fewer people living in extreme poverty. Reducing each country's Gini index by 1 percent per year has a larger impact on global poverty than increasing each country's annual growth 1 percentage points above forecasts. We also study the impact of COVID-19 on poverty and find that the pandemic may have driven around 60 million people into extreme poverty in 2020. If the virus increased the Gini by 2 pecent in all countries, then more than 90 million may have been driven into extreme poverty in 2020.Publication How much does reducing inequality matter for global poverty?(Springer Nature, 2022-03-02)The goals of ending extreme poverty by 2030 and working towards a more equal distribution of incomes are part of the United Nations’ Sustainable Development Goals. Using data from 166 countries comprising 97.5 percent of the world’s population, we simulate scenarios for global poverty from 2019 to 2030 under various assumptions about growth and inequality. We use different assumptions about growth incidence curves to model changes in inequality and rely on a machine-learning algorithm called model-based recursive partitioning to model how growth in GDP is passed through to growth as observed in household surveys. When holding within-country inequality unchanged and letting GDP per capita grow according to World Bank forecasts and historically observed growth rates, our simulations suggest that the number of extreme poor (living on less than 1.90 dollars/day) will remain above 600 million in 2030, resulting in a global extreme poverty rate of 7.4 percent. If the Gini index in each country decreases by 1 percent per year, the global poverty rate could reduce to around 6.3 percent in 2030, equivalent to 89 million fewer people living in extreme poverty. Reducing each country’s Gini index by 1 percent per year has a larger impact on global poverty than increasing each country’s annual growth 1 percentage point above forecasts. We also study the impact of COVID-19 on poverty and find that the pandemic may have driven around 60 million people into extreme poverty in 2020. If the pandemic increased the Gini index by 2 percent in all countries, then more than 90 million may have been driven into extreme poverty in 2020.Publication Measuring Inequality of Opportunity with Imperfect Data : The Case of Turkey(World Bank, Washington, DC, 2010-02)The measurement of inequality of opportunity has hitherto not been attempted in a number of countries because of data limitations. This paper proposes two alternative approaches to circumventing the missing data problems in countries where a demographic and health survey and an ancillary household expenditure survey are available. One method relies only on the demographic and health survey, and constructs a wealth index as a measure of economic advantage. The alternative method imputes consumption from the ancillary survey into the demographic and health survey. In both cases, the between-type share of overall inequality is computed as a lower bound estimator of inequality of opportunity. Parametric and non-parametric estimates are calculated for both methods, and the parametric approach is shown to yield preferable lower-bound measures. In an application to the sample of ever-married women aged 30-49 in Turkey, inequality of opportunity accounts for at least 26 percent (31 percent) of overall inequality in imputed consumption (the wealth index).
Users also downloaded
Showing related downloaded files
Publication Thailand Monthly Economic Monitor, October 2025(Washington, DC: World Bank, 2025-10-22)Fiscal conditions remained stable, with a modest widening of the deficit to 3.1 percent of GDP. New stimulus measures are expected to support short-term demand without breaching the public debt ceiling. Inflation stayed negative, reflecting lower energy and food prices amid subdued domestic demand. The central bank kept the policy rate unchanged, citing limited policy space. Thailand’s growth momentum has slowed further as manufacturing activity and services weakened as projected. Tourism remained subdued, largely due to fewer Chinese visitors. Goods exports also slowed as earlier front-loaded orders faded, particularly in agriculture and industrial goods. The Thai baht depreciated in early October as the US dollar appreciated and the current account turned negative.Publication Regional Poverty and Inequality Update: Latin America and the Caribbean, October 2025(Washington, DC: World Bank, 2025-10-23)This brief summarizes recent facts related to poverty and inequality in Latin America and the Caribbean (LAC) using the latest wave of harmonized household surveys from the Socio-Economic Database for LAC (SEDLAC). This brief was produced by the Poverty Global Practice in the LAC Region of the World Bank.Publication Housing Subsidies for Refugees(Washington, DC: World Bank, 2025-01-22)Refugees require assistance for basic needs like housing but local host communities may feel excluded from that assistance, potentially affecting community relations. This study experimentally evaluates the effect of a housing assistance program for Syrian refugees in Jordan on both the recipients and their neighbors. The program offered full rental subsidies and landlord incentives for housing improvements, but saw only moderate uptake, in part due to landlord reluctance. The program improved short-run housing quality and lowered housing expenditures, but did not yield sustained economic benefits, partly due to redistribution of aid. The program unexpectedly led to a deterioration in child socio-emotional well-being, and also strained relations between Jordanian neighbors and refugees. In all, housing subsidies had limited measurable benefits for refugee well-being while worsening social cohesion, highlighting the possible need for alternative forms of aid.Publication Digital Africa(Washington, DC: World Bank, 2023-03-13)All African countries need better and more jobs for their growing populations. "Digital Africa: Technological Transformation for Jobs" shows that broader use of productivity-enhancing, digital technologies by enterprises and households is imperative to generate such jobs, including for lower-skilled people. At the same time, it can support not only countries’ short-term objective of postpandemic economic recovery but also their vision of economic transformation with more inclusive growth. These outcomes are not automatic, however. Mobile internet availability has increased throughout the continent in recent years, but Africa’s uptake gap is the highest in the world. Areas with at least 3G mobile internet service now cover 84 percent of Africa’s population, but only 22 percent uses such services. And the average African business lags in the use of smartphones and computers as well as more sophisticated digital technologies that catalyze further productivity gains. Two issues explain the usage gap: affordability of these new technologies and willingness to use them. For the 40 percent of Africans below the extreme poverty line, mobile data plans alone would cost one-third of their incomes—in addition to the price of access devices, apps, and electricity. Data plans for small- and medium-size businesses are also more expensive than in other regions. Moreover, shortcomings in the quality of internet services—and in the supply of attractive, skills-appropriate apps that promote entrepreneurship and raise earnings—dampen people’s willingness to use them. For those countries already using these technologies, the development payoffs are significant. New empirical studies for this report add to the rapidly growing evidence that mobile internet availability directly raises enterprise productivity, increases jobs, and reduces poverty throughout Africa. To realize these and other benefits more widely, Africa’s countries must implement complementary and mutually reinforcing policies to strengthen both consumers’ ability to pay and willingness to use digital technologies. These interventions must prioritize productive use to generate large numbers of inclusive jobs in a region poised to benefit from a massive, youthful workforce—one projected to become the world’s largest by the end of this century.Publication Ukraine Country Environmental Analysis(World Bank, Washington, DC, 2016-01)The objective of the Country Environmental Analysis (CEA) is to assess the adequacy and performance of the policy, legal, and institutional framework for environmental management in Ukraine, in light of the decentralization process of environmental governance and wider reform objectives, and to provide recommendations to government to address the key gaps identified. Ukraine is the second largest country in Europe and has a population of 43 million, the majority of whom live in urban areas. It is a lower middle income country, with the services, industry and agriculture sectors being main contributors to the country’s Gross Domestic Product (GDP). Ukraine faces a number of environmental challenges, as identified in its National Environmental Strategy 2020 (NES). Key among these are: air pollution; quality of water resources and land degradation; solid waste management; biodiversity loss; human health issues associated with environmental risk factors; in addition to climate change. The scope of Ukrainian environmental legislation is quite broad and comprehensive (more than 300 legal acts) and covers most areas of environmental protection and natural resources management. However, the environmental legislation faces a number of weaknesses:The environmental legislation is largely declaratory in nature and does not have all the essential enforcement mechanisms for the implementation of legal acts and international agreements; Many of the acts are not coordinated with each other; and Legislation undergoes limited analysis of its impact—for example, no in-depth analysis such as Regulatory Impact Analysis is conducted for proposed pieces of legislation.