Measurement and Evaluation of Equality of Opportunity: A Numerical Look at Education, Health, and Income Inequality

Inequality in access to “opportunity” is one of the significant factors determining income inequality. The purpose of this paper is to analyze the economic effects of change in the initial allocation of resources and the redistribution of opportunity in terms of access to education and health. In this research we use a Computable General Equilibrium model, focusing on the initial distribution of educational opportunity and allocation of available resources. In our model, the difference among households is due to differences in opportunity, skill, and endowments of capital and labor. We introduce a method to quantify the opportunity premium. The model is calibrated based on Micro Consistent Matrix (MCM) of the Iranian economy. The results indicate that redistribution of opportunity and reallocations of educational resources can improve all equality indices. An important conclusion is that the income gap increases faster than the opportunity gap. Therefore, a reduction in income inequality is possible by small improvements in the equality of opportunity