A Random Forest approach of the Evolution of Inequality of Opportunity in Mexico

Working Paper 2022-614

Abstract

This work presents the trend of Inequality of Opportunity (IOp) and total inequality in wealth in Mexico for the years 2006, 2011 and 2017, and provides estimations using both an ex-ante and ex-post compensation criterion. We resort on a data-driven approach using supervised machine learning models to run regression trees and random forests that consider individuals’ circumstances and effort. We find an intensification of both total inequality and IOp between 2006 and 2011, as well as a reduction of these between 2011 and 2017, being absolute IOp slightly higher in 2017 than in 2006. From an ex-ante perspective, the share of IOp within total inequality slightly decreased although using an ex-post perspective the share remains stable across time. The most important variable in determining IOp is household´s wealth at age 14, followed by both, father´s and mother´s education. Other variables such as the ability of the parents to speak an indigenous language proved to have had a lower impact over time.

Authors: Thibaut Plassot, Isidro Soloaga, Pedro J. Torres.