Inequality of Opportunity in South Asia: The Puzzle of Educational Gains Without Consumption Gains

Abstract

More than two decades of sustained economic growth in South Asia brought significant reductions in poverty, yet inclusive social progress has remained elusive. Using a pseudo-panel approach with a large-scale harmonized dataset of 19 million observations across seven South Asian countries, we trace the evolution of inequality of opportunity (IOp) across cohorts born 1950s-1990s for three outcomes: education, labor markets, and consumption. We find substantial improvements in educational opportunities and unchanging high levels of IOp for consumption. Three mechanisms explain this divergence. First, educational expansion focused on basic schooling for the 1950s-80s cohorts—a skill level with limited labor market returns. Second, despite narrowing gender gaps in educational attainment, female labor force participation remains stubbornly low across cohorts. Third, even among equally educated individuals, circumstances continue to predict labor outcomes, suggesting persistent structural barriers to labor market access and fair rewards.