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Explaining the Health Equality Paradox of the Welfare State

Author

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  • Brekke, Kjell Arne

    () (Department of Economics, University of Oslo)

  • Grünfeld, Leo A.

    () (Oslo School of Management & MENON Business Economics)

  • Kverndokk, Snorre

    () (Ragnar Frisch Centre for Economic Research, UiO)

Abstract

A growing body of empirical studies have reported that social inequalities in health are as large (or even larger) in the Nordic welfare states than in many less egalitarian societies. This is highly surprising since the welfare state is rooted in income equality, free access to education and health services, and a generous social benefit system. This paper reviews this literature, and provides an explanation of this paradox based on the most common causal mechanism studied, namely the one that goes from income (or another socio economic variable) to health. We start by showing that the concentration index is much more sensitive to health contingent income transfers than income contingent health transfers. Then, we introduce a simple model where health is caused by status (relative income) and show that there actually exists as possibility that stratified societies may have lower health inequality than egalitarian societies, everything else equal, if class is unobservable. Thus, there may be a tradeoff between income and health equality. However, due to the insensitivity of the concentration index of health transfers, this tradeoff may not be shown by such inequality measures. A higher social health inequality as found in empirical studies, may therefore just be a sign of a more equal income distribution.

Suggested Citation

  • Brekke, Kjell Arne & Grünfeld, Leo A. & Kverndokk, Snorre, 2011. "Explaining the Health Equality Paradox of the Welfare State," HERO On line Working Paper Series 2011:3, Oslo University, Health Economics Research Programme.
  • Handle: RePEc:hhs:oslohe:2011_003
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    File URL: http://www.med.uio.no/helsam/forskning/nettverk/hero/publikasjoner/skriftserie/2011/2011_3.pdf
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    References listed on IDEAS

    as
    1. Angus Deaton, 2003. "Health, Inequality, and Economic Development," Journal of Economic Literature, American Economic Association, vol. 41(1), pages 113-158, March.
    2. Erreygers, Guido, 2009. "Correcting the Concentration Index: A reply to Wagstaff," Journal of Health Economics, Elsevier, vol. 28(2), pages 521-524, March.
    3. Eddy van Doorslaer & Xander Koolman, 2004. "Explaining the differences in income-related health inequalities across European countries," Health Economics, John Wiley & Sons, Ltd., vol. 13(7), pages 609-628.
    4. Sandra E. Black & Paul J. Devereux & Kjell G. Salvanes, 2007. "From the Cradle to the Labor Market? The Effect of Birth Weight on Adult Outcomes," The Quarterly Journal of Economics, Oxford University Press, vol. 122(1), pages 409-439.
    5. Kjell Arne Brekke & Snorre Kverndokk, 2012. "Inadequate Bivariate Measures of Health Inequality: The Impact of Income Distribution," Scandinavian Journal of Economics, Wiley Blackwell, vol. 114(2), pages 323-333, June.
    6. Case, Anne & Fertig, Angela & Paxson, Christina, 2005. "The lasting impact of childhood health and circumstance," Journal of Health Economics, Elsevier, vol. 24(2), pages 365-389, March.
    7. James P. Smith, 1999. "Healthy Bodies and Thick Wallets: The Dual Relation between Health and Economic Status," Journal of Economic Perspectives, American Economic Association, vol. 13(2), pages 145-166, Spring.
    8. Jennifer M. Mellor & Jeffrey D. Milyo, 2001. "Income inequality and health," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 20(1), pages 151-155.
    9. Terkel, Christiansen & Jørgen, Lauridsen & Häkkinen, Unto, 2010. "Determinants of inequalities in health with focus on retired - with particular regard to retired Danes," COHERE Working Paper 2009:4, University of Southern Denmark, COHERE - Centre of Health Economics Research.
    10. repec:dau:papers:123456789/10510 is not listed on IDEAS
    11. Robert B. Barsky & F. Thomas Juster & Miles S. Kimball & Matthew D. Shapiro, 1997. "Preference Parameters and Behavioral Heterogeneity: An Experimental Approach in the Health and Retirement Study," The Quarterly Journal of Economics, Oxford University Press, vol. 112(2), pages 537-579.
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    Cited by:

    1. Brekke, Kjell Arne & Kverndokk, Snorre, 2014. "Health contingent income transfers. Are they relevant?," HERO On line Working Paper Series 2014:5, Oslo University, Health Economics Research Programme.

    More about this item

    Keywords

    Income inequality; health inequality; socioeconomic status; welfare states; concentration index;

    JEL classification:

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

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