Inequality of Opportunity in Earnings and Consumption Expenditure: The Case of Indian Men

Abstract

The paper associates inequality of opportunities with outcome differences that can be accounted by predetermined circumstances which lie beyond the control of an individual, such as parental education, parental occupation, caste, religion, and place of birth. The non‐parametric estimates using parental education as a measure of circumstances reveal that the opportunity share of earnings inequality in 2004–05 was 11–19 percent for urban India and 5–8 percent for rural India. The same figures for consumption expenditure inequality are 10–19 percent for urban India and 5–9 percent for rural India. The overall opportunity share estimates (parametric) of earnings inequality due to circumstances, including caste, religion, region, parental education, and parental occupation, vary from 18 to 26 percent for urban India, and from 16 to 21 percent for rural India. The overall opportunity share estimates for consumption expenditure inequality are close to the earnings inequality figures for both urban and rural areas. The analysis further finds evidence that the parental education specific opportunity share of overall earnings (and consumption expenditure) inequality is largest in urban India, but caste and geographical region also play an equally important role when rural India is considered.

Keywords: inequality of opportunity, earnings inequality, consumption expenditure inequality, India

JEL Classification: D31, D63, J62