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Health, Income, and Measures of Inequality – Why Inequality May Decline When All Inequality Measures Indicate the Opposite

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  • Kjell Arne Brekke
  • Snorre Kverndokk

Abstract

We study how measures of socioeconomic health inequality inform about welfare inequality. We argue that transfers of either income or health from a better off to a worse off individual should reduce welfare inequality. Lacking an objective measure of individual welfare, we suggest that such a transfer should reduce at least one measure of inequality: inequality in income, health or socioeconomic health. This puts restrictions on measures of socioeconomic health inequality, where a correlation between income and health meets the requirement, while the concentration index only meets the requirement in a statistical sense. Finally, we show empirically that changes in the concentration index over time can be dominated by changes in income. Using data from HUNT, income changes account for 90% of the changes in the concentration index, while health and income are equally important with data from EU-SILC, with large variation across countries and years.

Suggested Citation

  • Kjell Arne Brekke & Snorre Kverndokk, 2024. "Health, Income, and Measures of Inequality – Why Inequality May Decline When All Inequality Measures Indicate the Opposite," CESifo Working Paper Series 11318, CESifo.
    • Handle: RePEc:ces:ceswps:_11318
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    References listed on IDEAS

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    More about this item

    Keywords

    socioeconomic inequality; health inequality; health transfers; income transfers; concentration index;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

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