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Lost in Translation: Rethinking the Inequality-Equivalence Criteria for Bounded Health Variables

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Abstract

What change in the distribution of a population’s health preserves the level of inequality? The answer to this analogous question in the context of income inequality lies somewhere between a uniform and a proportional change. These polar positions represent the absolute and relative inequality equivalence criterion (IEC), respectively. A bounded health variable may be presented in terms of both health attainments and shortfalls. As a distributional change cannot simultaneously be proportional to attainments and to shortfalls, relative inequality measures may rank populations differently from the two perspectives. In contrast to the literature that stresses the importance of measuring inequality in attainments and shortfalls consistently using an absolute IEC, this chapter formalizes a new compromise concept for a bounded variable by explicitly considering the two relative IECs, defined with respect to attainments and shortfalls, to represent the polar cases of defensible positions. We use a surplus-sharing approach to provide new insights on commonly used inequality indices by evaluating the underpinning IECs in terms of how infinitesimal surpluses of health must be successively distributed to preserve the level of inequality. We derive a one-parameter IEC that, unlike those implicit in commonly used indices, assigns constant weights to the polar cases independent of the health distribution.

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  • Kjellsson, Gustav & Gerdtham, Ulf-G., 2013. "Lost in Translation: Rethinking the Inequality-Equivalence Criteria for Bounded Health Variables," Working Papers 2013:18, Lund University, Department of Economics, revised 02 Jan 2014.
  • Handle: RePEc:hhs:lunewp:2013_018
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    File URL: http://project.nek.lu.se/publications/workpap/papers/WP13_18.pdf
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    Cited by:

    1. Kjellsson, Gustav, 2014. "Extending Decomposition Analysis to Account for Socioeconomic Background: Income-Related Smoking Inequality among Swedish Women," Working Papers 2014:29, Lund University, Department of Economics.
    2. Calara, Paul Samuel & Gerdtham, Ulf-G & Petrie, Dennis, 2016. "The Dynamics of Income-Related Health Inequalities in Australia versus Great Britain," Working Papers 2016:20, Lund University, Department of Economics.
    3. Kristof Bosmans, 2016. "Consistent Comparisons of Attainment and Shortfall Inequality: A Critical Examination," Health Economics, John Wiley & Sons, Ltd., vol. 25(11), pages 1425-1432, November.

    More about this item

    Keywords

    health inequality; bounded variable; inequality equivalence criteria;

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • I14 - Health, Education, and Welfare - - Health - - - Health and Inequality

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