The Impact of Oportunidades on Inequality of Opportunity in Rural and Urban Areas in Mexico

Abstract

The analysis of inequality of opportunity has become an important issue in recent economic literature, especially in Latin America. This study proposes a link to the capability approach and analyzes the performance of the Mexican conditional cash transfer program Oportunidades in terms of inequality of opportunity. A MIMIC framework is used to estimate children's latent development capabilities and their dependence on family background variables. The results suggest that Oportunidades increases overall capabilities and is able to reduce significantly the dependence of capabilities on circumstances, mostly family background variables, hence reducing inequality of opportunity. The findings of this study suggest that the use of conditional cash transfer programs might be a very useful tool to reduce inequality of opportunity.

Keywords: Oportunidades, Inequality of Opportunity, multidimensional human development

JEL Classification: I3, O15