{smcl}
{hline}
help for {hi:iop}: module to compute ex-ante inequality of opportunity {right:{browse "http://www.econ.chavezjuarez.com/vcheck.php?i=iop&v=2.6":[Version 2.6]}}
{hline}
{ul:Content}
{help iop##syntax:1. Syntax}
{help iop##description:2. Description of the routine and methods}
{help iop##options:3. Options}
{help iop##bootstrap:4. Estimating standard errors}
{help iop##examples:5. Examples}
{help iop##alternatives:6. Alternative routines}
{help iop##developments:7. Future developments & bugs}
{help iop##authors:8. Authors}
{help iop##references:9. References}
{help iop##thanks:10. Acknowledgements}
{dlgtab 0 0:Syntax}{marker syntax}
The current syntax of the {cmd:iop} is:
{p 4 8 2}{cmd:iop}
{depvar} {indepvars} {ifin} {weight} [,{cmdab:d:etails} {cmdab:t:ype(}{it:str}{cmd:)} {cmdab:s:hapley(}{it:str}{cmd:)} {cmdab:sgr:oups(}{it:str}{cmd:)} {cmdab:o:axaca(}{it:groupvar stat}{cmd:)}
{cmdab:l:ogit} {cmdab:boot:strap}{cmd:(}{it:int}{cmd:)} {cmdab:no:loglin} ]
{hi:fweights} and {hi:iweights} are allowed, see help {help weights}
{marker oldsyntax}Syntax of version 1.0 (still working, but not recommended):
{p 4 4 2}{cmd:iop}
{depvar} {indepvars} {ifin} [,{cmdab:boot:strap}{cmd:(}{it:int}{cmd:)}
{cmdab:decomp:osition}
{cmdab:gr:oups}{cmd:(}{it:varname (max=1)}{cmd:)}
{cmdab:pr:opt}{cmd:(}{it:str}{cmd:)}
{cmdab:bootopt}{cmd:(}{it:str}{cmd:)}]
{dlgtab 0 0:Description}{marker description}
{p 0 0 2} This routine computes different measures of ex-ante inequality of opportunity for continuous, binary and ordered
variables proposed in the literature. The general idea behind these methods is to explain an outcome by people's circumstances
for which they cannot be held responsible. The general approach has two (sometimes three) steps: {break}
{p 2 5} 1. First the expected outcome, conditional on circumstances, is computed. All variation is exclusively due to circumstances. This is done
by the means of an OLS or a probit, depending on the type of variable. {break}
{p 2 5} 2. An inequality measure is applied to this conditional expectation. {break}
{p 2 7}(3.) Sometimes a third step is performed where the inequality measure is divided by the same inequality measure computed on the
original outcome in order to get a relative measure of inequality.
{p 0 0}For more details, see for instance Wendelspiess Ch{c a'}vez Ju{c a'}rez (2013).
{p 0 4 0} {marker fg1} {hi:{help iop##ref_fg1:Ferreira & Gignoux - Continuous variables with inherent scale}} (abbreviation: fg1)
Ferreira & Gignoux (2011) propose to estimate first an OLS regression of the continuous outcome (positive values) on a set of circumstances.
The log mean deviation (MLD) is then applied to the predicted values (conditional expectation}. By dividing this measure by the mean log
deviation of the original outcome variable, a relative measure of inequality of opportunity is obtained. These measures are scale, but not
translation invariant.
{p 0 4 5}{marker fg2}{hi:{help iop##ref_fg2:Ferreira & Gignoux - Continuous variables without inherent scale}} (abbreviation: fg2)
Ferreira & Gignoux (2011b) is very similar to Ferreira & Gignoux (2011) but is particularly suited for continuous variables without
inherent scale (e.g. test scores). For such variables, a measure that is both, translation and scale invariant is needed. They propose to use the
relative measure only and as inequality indicator the variance. The resulting relative inequality of opportunity measure is equal to the
R squared of a simple OLS regression. This measure is translation and scale invariant.
{p 0 4 5}{marker pdb}{hi:{help iop##ref_pdb:Paes de Barros (2008) - Dichotomous and ordered variables}} (abbreviation: pdb)
Paes de Barros et al (2008) propose to estimate first a probit on the dummy variable (for ordered variable a threshold must be chosen and dummy
constructed). The predicted probability (conditional probability) is then used to compute the dissimilarity index, which is an absolute measure
of inequality in opportunity. The measure is scale but not translation invariant.
{p 0 4 5}{marker ws}{hi:{help iop##ref_ws:Wendelspiess Ch{c a'}vez Ju{c a'}rez (2013) - Dichotomous and ordered variables}} (abbreviation: ws)
This method is basically the same as Paes de Barros et al (2008) but uses a modified dissimilarity index that is translation
invariant but not scale invariant.
{hi:OVERVIEW}
{ul:Abbrev} {col 10}{ul:Variable type} {col 31}{ul:Inequality measure} {col 60}{ul:Absolute} {col 73}{ul:Relative}
fg1* {col 10}cont. (with scale) {col 31}mean log deviation {col 60}yes {col 73}yes
fg2 {col 10}cont. (no scale) {col 31}variance {col 60}no {col 73}yes
pdb {col 10}dummy/ordered {col 31}dissimilarity index (DI) {col 60}yes {col 73}no
ws {col 10}dummy/ordered {col 31}modified DI {col 60}yes {col 73}no
{p 0 3 3}*= fg1 is used for the method in general, while we use {hi:fg1a} and {hi:fg1r} to distinguish between the absolute and the relative measure respectively.
Alternative Stata routines are mentioned {help iop##alternatives:below}.
{dlgtab 0 0:Options}{marker options}
{p 4 8 2}{marker type}{cmdab:t:ype(}{it:str}{hi:)} can be used to specify the type of the variable. It is optional because {hi:iop} tries to figure out on
its own the type of the dependent variable. If {hi:iop} fail at identifying the type, you can specify it here. The possible values are:
{break}
{hi:c} continuous variables{break}
{hi:o} ordered variables{break}
{hi:d} dummy variables
{p 4 8 2}{cmdab:d:etail} allows you to display the OLS regression or the probit model estimated by {hi:iop}. By default, these models are not displayed.
{marker optshapley}
{p 4 8 2}{cmdab:s:hapley(}{it:str}{hi:)} allows you to decompose the inequality of opportunity measure in the relative contribution of each
circumstance variable based on the Shapley value. Note that due to possibly omitted circumstances, these values cannot be seen as causal (see
{help iop##ref_fg1:Ferreira & Gignoux (2011)}) for a discussion on this issue).
{p 4 8 2}{cmdab:sgr:oups(}{it:str}{hi:)} allows you to group some variables for the shapley decomposition. This is especially useful when you have too many circumstance
variables or if two variables must not be separated (e.g. age and age squared). Simply write the variable names and separate the groups by a comma. For example, assume we have the
variables a1, a2, b1, c1 and c2 and would like to group them. You can simply indicate sgroups(a1 a2,b1,c1 c2) to create three groups.
{marker optgroup}
{p 4 8 2}{cmdab:o:axaca(}{it:groupvar stat}{hi:)} Using this option, {cmd:iop} performs a Oaxaca-like decomposition according to the group variable. This group
variable should be numeric and contain a finite number of different values. No upper limit is given, but for a proper display, you should not exceed 10 values.
This option is only available for dichotomous and continuous variables. If you would like to use if for an ordered variable, first dichotomize it and then use the
syntax for dummy variables. The option uses two arguments, the first {it:groupvar} is the variable indicating the groups and {it:stat} is the statistic you
want to decompose. For dummy variables the possible values are {it:pdb} and {it:ws}, while for continuous variables only {it:fg1a} is available, since the
relative measures should not be decomposed in this way.
{p 4 8 2}{cmdab:l:ogit} changes the default probit model to a logit model for dichotomous and ordered variables.
{p 4 8 2}{cmdab:boot:strap}{cmd:(}{it:int}{cmd:)} Use this option to estimate bootstrap standard deviations of the different measures. The argument is simply the number of
replications.
{p 4 8 2}{cmdab:no:loglin} Use this option to avoid the log-lineralization of the dependent variable. Is only relevant for the {help iop##ref_fg1:Ferreira & Gignoux (2011)}) method.
{ul:Options of the {help iop##oldsyntax:old syntax} (Version 1.0)}
{p 4 8 2}{cmdab:boot:strap}{cmd:(}{it:int}{cmd:)} Use this option to include bootstrap confidence intervals of the dissimilarity index by indicating the desired
amount of repetitions. The default value is 0, resulting in no computation of bootstrap confidence intervals.
{p 4 8 2}{cmdab:decomp:osition} This option includes a decomposition of the computed dissimilarity index. The same method is used and all but one variable is set
to the average when computing the predicted values. Beware of the fact that the sum of these estimates does not necessarily yield to the total effect.
{p 4 8 2}{cmdab:gr:oups}{cmd:(}{it:varname (max=1)}{cmd:)} By activating this option, the decomposition across groups is performed. Indicate the categorical
variable containing a definition of the groups.
{p 4 8 2}{cmdab:pr:opt}{cmd:(}{it:str}{cmd:)} Use this option to include special options in the probit estimation. Just write your probit options normally
and they are transmitted to the probit estimation in the script.
{p 4 8 2}{cmdab:bootopt}{cmd:(}{it:str}{cmd:)} Use this option to include special options in the bootstrap sampling. Just write your bootstrap options
normally and they are transmitted to the {it:bsample} command in the script.
{dlgtab 0 0:Estimating standard errors}{marker bootstrap}
{p}We offer a built in estimation for bootstrap standard errors. The options are relatively limited and we encourage users who would like to change
parameters of the bootstrap method to use the Stata command. Look at the {help iop##examples:last example} hereafter to find out how you can perform the bootstrap standard errors.
Moreover, including analytical standard errors is planned for {help iop##developments:future developments}.
{dlgtab 0 0:Examples}{marker examples}
{p 0 8 2}{cmd:iop} access_school education_father family_income indigenous, shapley(pdb)
{p 4 4}This example calculates the inequality of opportunity in the access to schooling based on three explanatory variables: father's education,
the family income and a dummy for indigenous people. Additionally, a shapley decomposition of the {help iop##pdb:Paes de Barros et al (2008)} method is performed.
{p 0 8 2}{cmd:iop} access_school education_father family_income indigenous, oaxaca(gender ws)
{p 4 4}This example performs the same estimation as the first example but adds the Oaxaca-like decomposition by gender, meaning that the
adapted dissimilarity index is computed for women and men individually and for the counterfactual combinations as well. This is for example the dissimilarity
index of women if they had the estimated coefficients of men or vice versa.
{p 0 8 2}{cmd:iop} income education_father family_income indigenous, detail
{p 4 4} This method estimates inequality of opportunity in income based on the same three circumstances as in the first example. The option {it:detail}
allows seeing the underlying OLS estimation as well. Both methods proposed by Ferreira & Gignoux are applied.
{p 0 8 2}{cmd:iop} income education_father family_income indigenous, boot(200)
{p 4 4} This example estimates exactly the same model as the example before, but computes in addition to the point estimates the
bootstrap standard errors for 200 replications. You should not perform the bootstrap together with the shapley-decomposition,
or the oaxaca-like decomposition since this would be extremely computation intensive.
{marker alternatives}
{dlgtab 0 0:Alternative routines}
{p 0 0 2} For the case of binary variables, an alternative routine to estimate the dissimilarity index is {stata ssc desc hoi:hoi}. Differences between the two routines include the estimation of the conditional probability (hoi uses
logit instead of probit) and mainly the options the routine offers to the user. For inference, {cmd:hoi} should be preferred, since it computes not only
the bootstrap standard errors but also the analytical standard errors.
If we forgot to mention another routine here, please let us know.
{dlgtab 0 0:Future developments}{marker developments}
{p 0 0 2} The routine {cmd:iop} will be developed further. If you have particular suggestions,
please let us know. {break} We tested the routine extensively before publication. However, we cannot exclude all errors. We appreciate a lot if you could indicate us remaining bugs in the
program. {break}To update the routine type {stata ssc install iop, replace:scc install iop, replace}
{dlgtab 0 0:Authors}{marker authors}
Florian Wendelspiess Ch{c a'}vez Ju{c a'}rez, CIDE Mexico City ({browse "mailto:florian@chavezjuarez.com?subject=Stata routine iop:":florian@chavezjuarez.com})
Isidro Soloaga, Universidad Iberoamericana, Ciudad de M{c e'}xico
{dlgtab 0 0:References}{marker references}
{p 0 4 2}{marker ref_fg1} Ferreira, Francisco H.G. and J{c e'}r{c e'}mie Gignoux (2011), "The Measurement of Inequality of Opportunity: Theory and an Application to
Latin America", The Review of Income and Wealth, 2011, 57 (4), pp. 622-657 {browse "http://onlinelibrary.wiley.com/doi/10.1111/j.1475-4991.2011.00467.x/abstract":[Direct link to paper]}
{p 0 4 2}{marker ref_fg2} Ferreira, Francisco H.G. and J{c e'}r{c e'}mie Gignoux (2011b), "The Measurement of Educational Inequality:
Achievement and Opportunity" World Bank Policy Research Working Paper 5873
{p 0 4 2}{marker ref_pdb}Paes de Barros, R and M. de Carvalho (2008). Measuring Inequality of Opportunity in Latin America and the Caribbean"
{p 0 4 2}Paes de Barros, R and M. de Carvalho and S. Franco (2007). Preliminary Notes on the Measurement of Socially-Determined Inequality of
Opportunity when the Outcome is Discrete". IPEA, Rio de Janeiro
{p 0 4 2} Paes de Barros, Ricardo and Francisco H. G. Ferreira and Jos{c e'} R. Molinas Vega and Jaime Saavedra Chanduvi.
Measuring Inequality of Opportunities in Latin America and the Caribbean-Inequality. The World Bank. 2009
{p 0 4 2}Soloaga, Isidro and Florian Wendelspiess Ch{c a'}vez Ju{c a'}rez. Desigualdad de Oportunidades: aplicaciones al caso de M{c e'}xico. IN: Movilidad
Social en M{c e'}xico: Poblaci{c o'}n, desarrollo y crecimiento, edited by Julio Serrano Espinosa and Florencia Torche. Centro de Estudios Espinosa Yglesias. Mexico City. 2010.
{p 0 4 2}Soloaga, Isidro and Florian Wendelspiess Ch{c a'}vez Ju{c a'}rez (2012). El comando iop para estimar desigualdad cuando el indicador es binario.
Forthcoming in: Aplicaciones en Econom{c i'}a y Ciencias Sociales con Stata. Stata Press.
{p 0 4 2}{marker ref_ws}Wendelspiess Ch{c a'}vez Ju{c a'}rez, Florian and Soloaga, Isidro (2013). Scale vs. Translation Invariant Measures of Inequality of Opportunity when the Outcome is Binary
(February 27, 2013). Available at SSRN: {browse "http://ssrn.com/abstract=2226822"}
{dlgtab 0 0:Acknoledgements}{marker thanks}
We would like to thank Paul Hufe for pointing to a bug regarding the log-linearization in the Ferreira & Gignoux (2011) methodology.