Equity, efficiency and inequality traps: A research agenda

This paper discusses a research agenda that arises from unanswered questions and unresolved issues considered in the World Bank’s World Development Report 2006: Equity and Development. After formalizing the key concepts of equity; equality of opportunity; and efficiency, and proposing a definition for an equitable development policy, the paper discusses the concept of inequality traps, around which the research agenda is structured. Four broad groups of research questions are highlighted: those revolving around the measurement of inequality of opportunity and the diagnostics for the existence of an inequality trap; those dealing with the causes of inequality traps; the quantification of their efficiency costs; and those related to how institutions (including governments) evolve to overcome inequality traps. Bourguignon and Ferreira are in the Development Economics Vice-Presidency, The World Bank. Michael Walton is at the John F. Kennedy School of Government, Harvard University. Together, they led the team that produced the World Bank’s World Development Report 2006: Equity and Development.