Testing inequality of opportunity in Italy within the ANOVA framework

While the analysis of inequality has been central to economic studies for centuries, it was only in recent years that studies have concentrated on the distinction between inequality of opportunity (IO) and inequality of returns to effort (IRE) and have attempted empirical estimates of the two components. The decomposition of a general inequality index into these two components allows to analyze the prevalence of fair or unfair income inequality within a country. This paper suggests to test the differences between the two sources of inequality in a simple way using the ANOVA framework adapted to decompose the coefficient of variation, to better suit the requirements of an inequality index. The proposed procedure is applied to the Italian Survey on Income and Living Condition (IT-SILC data, wave 2005 and 2011). The empirical results help identifying the circumstances that foster the rise of inequality of opportunities in Italy. Our analysis shows, in particular, that father education, region of residence and gender result as the most relevant circumstances determining inequality of opportunity. On the other side, the role of mother education starting from a lower level as an inequality of opportunity factor, has increased its influence over time.