Measuring Inequality of Opportunity for the Backward Communities: Regional Evidence from the Indian Labour Market

The affirmative action policy for socially and economically backward communities in employment has been a debated issue in India. In this context, this paper aims to analyze the level of inequality by distinguishing between ‘circumstance’ and ‘effort’ factors in the Roemer’s framework on equality of opportunity. We measure inequality of opportunities due to two circumstances: caste and religion. Our empirical analysis, at state-level, utilizes a recent household survey data, which provides information related to efforts as well as circumstances of workers. The paper estimated inequality in the labour market and then decomposed it to know the circumstances that cause income inequality. Our estimates indicated that inequality and inequality of opportunity is substantially higher in India. Specifically, the outcome of our analysis evidently indicated that the socially backward communities do have economically disadvantageous position in some of the Indian states. However, the degree of circumstances based on inequality varies to a great extent among the states. Therefore, we suggest that the country does not need a nation-level affirmative action policy instead a state-level policy could be more appropriate as the intensity of the problem differ significantly among the Indian states.