Consumption dynamics and inequality of opportunity with an application to Uganda

• DOI: http://doi.org/10.1111/rode.12357
• Published date: 01 May 2018
• Author: Vito Peragine,Paolo Brunori,Flaviana Palmisano
• Date: 01 May 2018

REGULAR ARTICLE

Consumption dynamics and inequality of

opportunity with an application to Uganda

Paolo Brunori

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Flaviana Palmisano

3

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Vito Peragine

2

1

University of Florence, Florence, Italy

2

University of Bari, Bari, Italy

3

University of Rome La Sapienza, Rome,

Italy

Correspondence

Paulo Brunori, Dipartimento di Scienze

per l’Economia e l’Impresa, University of

Florence, Via delle Pandette 32, 50127,

Firenze, Italy.

Email: paolo.brunori@unifi.it

Abstract

This paper proposes the adoption of an opportunity egali-

tarian perspective to assess and compare growth processes

and their distributional implications. To this aim, a set of

graphical tools are introduced that allow one to evaluate

the role of growth and recessions in the evolution of indi-

viduals’opportunities over time. These tools satisfy the

ex post principle of equality of opportunity and represent

an extension of the “opportunity growth incidence curve,”

a framework proposed by the literature to evaluate growth

according to the ex ante principle of equality of opportu-

nity. This measurement framework is applied to evaluate

the economic dynamic between 2009 and 2011 in

Uganda. The results show that despite a reduction in the

real value of household consumption and a surge in out-

come inequality, its effects appear to be less dramatic

when the ex post equality of opportunity perspective is

invoked.

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INTRODUCTION

In this paper, we argue that a deeper understanding of the distributional dynamics that take place

in an economy can be obtained by complementing the standard micro-approach, which is based on

income and consumption, with an analysis of the distributive effects of growth in terms of oppor-

tunities.

The relevance of opportunities for the analysis of distributional phenomena has been defended

by a well-established branch of the literature, namely, the equality of opportunity literature: see

Ferreira and Peragine (2016), Fleurbaey (2008), Ramos and Van de Gaer (2015), Roemer and

Trannoy (2016) for surveys of the opportunity egalitarian approach. For a specific discussion of

DOI: 10.1111/rode.12357

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©2017 John Wiley & Sons Ltd wileyonlinelibrary.com/journal/rode Rev Dev Econ. 2018;22:632–657.

the opportunity perspective for the analysis of developing countries, see World Bank (2006). This

literature revolves around the idea that it is useful to distinguish between outcome inequalities,

which can be attributed to exogenous circumstances, that is, factors that lie outside the sphere of

individual responsibility, and residual inequalities, which are attributable to individual effort. Dif-

ferent models are proposed in which the opportunities open to individuals are deduced from basic

assumptions on the functional relations among individual achievements, circumstances, and effort.

We endorse this view, and in this paper, we propose an extension of the theoretical framework

introduced by Peragine, Palmisano, and Brunori (2014) to investigate the distributional impact of

growth. In their paper, the opportunity redistributive impact of growth is measured by estimating

the individual “opportunity growth incidence curve”(individual OGIC) and the type “opportunity

growth incidence curve”(type OGIC). The individual OGIC enables one to assess the pure distri-

butional effect of growth in terms of increasing or reducing aggregate inequality of opportunity

(IOp). The type OGIC allows one to track the evolution of specific population groups in the

growth process to detect the existence of possible inequality traps.

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As is the case for any analytical tool aimed at evaluating inequality of opportunity, the con-

struction of the OGIC requires the explicit endorsement of an exact definition of equality of oppor-

tunity (EOp) among all possible declinations offered by the literature. The ex ante approach is at

the base of the OGIC framework. It postulates that there is EOp if the value of the opportunity set

of all types—that is, individuals sharing the same set of circumstances—is the same. Hence,

inequality of opportunity can be measured as inequality between individual opportunity sets. In

practice, every individual’s actual outcome is replaced by some evaluation of her opportunity set,

and inequality between these values is identified as inequality of opportunity. However, the ex post

principle of EOp is also widely used in the literature. It postulates that there is equality of opportu-

nity if individuals exerting the same degree of effort are given the same outcome (Roemer, 1998).

Hence, inequality of opportunity can be measured as inequality within the group of individuals that

exerted the same effort—the tranche. Although apparently similar in spirit, ex ante and ex post

EOp principles have been shown to be incompatible (Fleurbaey & Peragine, 2013). In particular, it

has been shown that an ex ante measure of IOp is inconsistent with the compensation principle at

the foundation of the ex post approach. This, of course, has implications when the evaluation of

growth under the light of EOp becomes the focus of the analysis: the result is that the OGIC

framework introduced by Peragine et al. (2014), which is based on the ex ante approach, is not

fully consistent with the ex post approach.

To address this issue, in this paper, we propose a new framework for the evaluation of con-

sumption dynamics from an opportunity egalitarian perspective, which proves to be coherent

with the ex post principle of EOp. This framework consists of two curves: the ex post individual

“opportunity growth incidence curve”(ex post individual OGIC) and the class “opportunity

growth incidence curve”(class OGIC). The former plots the rate of growth of the individuals in

the same position in two outcome distributions neutralized for the effect of effort on inequality.

The latter plots the rate of income growth for each subgroup of the population, where the sub-

groups are defined in terms of individuals who share the poorest outcome for each given level

of effort. These curves integrate the set of existing tools for the evaluation of growth according

to an EOp perspective and can be used to complement the standard outcome-based analysis of

growth.

We apply these frameworks to analyze the distributional impact of the growth episode in

Uganda that took place between 2009/2010 and 2010/2011, using two waves of the Uganda

National Panel Survey (UNPS). This period was characterized by growth in both GDP and nomi-

nal consumption, following a prolonged trend of the peace and security that began after the end of

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