Empirical definition of social types in the analysis of inequality of opportunity: a latent classes approach

Abstract

The empirical analysis of inequality of opportunity centres on disparities between social types, defined by the exposure to circumstances beyond individual control. Despite this, its main theoretical foundation—the Roemer model—does not indicate how to carry out, in practice, the required partition of the population into such types. This paper operationalises this definition of social types using a latent classes approach. Our specification is embedded in a probabilistic extension of the canonical Roemer model, which assumes that the relevant population consists of a finite number of latent types, from which each individual can be treated as a random draw. This makes possible the use of the full set of circumstances in the data, allows for unobserved individual heterogeneity and does not require an ex-ante specification of the number of types by the researcher. Our approach is illustrated by an empirical application featuring a large UK cohort study that was used in earlier literature to examine inequalities of opportunity in a wide array of social outcomes.