Measuring multidimensional inequality of opportunity

Abstract This paper extends the measurement of inequality of opportunity (IOP) to the case in which individual outcomes are multidimensional (e.g. income, health). We adopt an axiomatic approach to the construction of IOP measures. We characterize two classes of social welfare functions, each endorsing ex ante compensation but different reward principles: (1) utilitarian and (2) inequality averse. For each class we develop implementable conditions analogous to Lorenz dominance and IOP measures. As a major result we ax-iomatically characterize a multidimensional inequality of opportunity index corresponding to the Tsui (1995) inequality index applied to the framework of equality of opportunity. The measure is sensitive to dependence between outcomes – a distinctive feature of multidimensional distributions, and has a straightforward interpretation. Using the 2019 wave of EU SILC data we show that the multidimensional analysis of inequality of opportunity in Europe reveals important differences with respect to the analysis based on income alone, showing the value of the multidimensional perspective. JEL classification: D63, I32