Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/245740 
Year of Publication: 
2021
Series/Report no.: 
IZA Discussion Papers No. 14689
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
In this paper we propose the use of machine learning methods to estimate inequality of opportunity. We illustrate how our proposed methods—conditional inference regression trees and forests—represent a substantial improvement over existing estimation approaches. First, they reduce the risk of ad-hoc model selection. Second, they establish estimation models by trading off upward and downward bias in inequality of opportunity estimates. The advantages of regression trees and forests are illustrated by an empirical application for a cross-section of 31 European countries. We show that arbitrary model selection may lead to significant biases in inequality of opportunity estimates relative to our preferred method. These biases are reflected in both point estimates and country rankings. Our results illustrate the practical importance of leveraging machine learning algorithms to avoid giving misleading information about the level of inequality of opportunity in different societies to policymakers and the general public.
Subjects: 
equality of opportunity
machine learning
random forests
JEL: 
D31
D63
C38
Document Type: 
Working Paper

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