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JOBS FOR SHARED PROSPERITY
et al. 2007). Box 1.1 explains in detail the index construction. The index can be interpreted as the share of the “outcome” that needs to be reallocated among the groups with different life circumstances to ensure equality of opportunities. It ranges between 0 and 1, with higher values suggesting higher inequality (see box 1.1). For instance, a D-index equivalent to 0.3 for the outcome variable “having formal employment” would suggest that 30 percent of all individuals having formal employment are disproportionately represented in one or more circumstance group; thus, to achieve equal opportunities across different circumstance groups, one would need to reallocate 30 percent of formal jobs.
BOX 1.1
The present analysis includes data from Egypt, Jordan, and Morocco for individuals between 21 and 34 years old. The exogenous circumstances considered in the analysis include the person’s gender, his or her location (urban or rural), the wealth quintile of his or her household, and the level of education of his or her mother and father. To control for individual effort, the analysis includes educational attainment and age (as a proxy for years of working experience). It is worth noting that ability and effort are largely unobservable, and thus the analysis is likely to underestimate the effect of individual effort on outcome inequality. Since this framework requires the identification of advantages or outcomes deemed to be favorable, the results
The dissimilarity index
In Roemer’s framework (Roemer 1998), social fairness exists when an individual’s efforts prevail over his or her circumstances in determining the main outcomes that defi ne his or her life. In some cases, to achieve social fairness, government interventions might be required to alleviate the “additional” burden that these circumstances impose on a certain group of people, to delink desirable outcomes from privileged backgrounds, and provide everyone realistic possibilities of success. The Dissimilarity Index is used to capture the extent to which opportunities are distributed equally in society. The first step in constructing the index is to identify a dichotomous variable that captures the outcomes deemed to be socially desirable, such as having more income, more human capital, or highquality high-paying employment. The second step is to identify a set of variables that captures individual circumstances and individual efforts. As described in Bourguignon et al. (2007), circumstances are factors that are out of the individual’s control, such as gender, race, family background, and place of birth, but that may affect their capacity to gain advantages. Effort, however, can be affected by individual choice. The following basic steps are used to calculate the dissimilarity index (D): 1. Estimate a separable logistic model on whether individual i had access to a given basic good or service as a function of his or her circumstances.
From the estimation of this logistic regression, we will obtain coefficient estimates. 2. Given these coeffi cient estimates, determine for each individual in the sample the predicted probability of access to the basic good or service in consideration, pi , based on the predicted relationship, bˆ k,and a vector of their circumstances xki: ˆi = p
Exp( bˆ 0 + ∑ km= 1 xkibˆ k) . 1 + Exp( bˆ 0 + ∑ km= 1 xkibˆ k )
3. Compute the overall coverage rate C (where wi = 1/n or some sampling weights): n
C = ∑ wi pˆ i . 1
4. Compute the dissimilarity index (D): n ˆ = 1 D Wi | pi − C |. ∑ 2C i =1
The index has several advantages: it is easy to calculate, allows progress to be monitored over time, and is particularly useful for comparing inequality of opportunities across different countries and sectors of the population. Another advantage of the index is that it can be easily decomposed so that the contribution of all circumstances to the dissimilarity index adds up to 100 percent (see Hoyos and Narayan 2011).