Decomposing health inequality in the EU

Despite high living standards and a nearly universal healthcare provision, large cross-country differences in population health exist in the European Union. More than half of this variation remains unexplained after accounting for macro-level factors. In our paper, we aim to understand how individual-level differences in demographic characteristics, education, labour market factors and income shape the prevalence of poor self-assessed health in the EU. For this purpose, we use a semi-parametric decomposition approach, which relies on constructing synthetic distributions of health that would prevail in each country if they had the distribution of the analysed factors as in the country with the best self-assessed population health – Ireland. We find regional variation in the decomposition results. The analysed factors explain up to a third of the health inequality in the EU for Southern and Central and Eastern European (CEE) countries, but they fail to explain the health differences for the Western European countries. We suggest that cross-country variation in the reporting of self-assessed health may be partially responsible for this result. Finally, we find that the detailed decomposition results for some of the explanatory factors are sensitive to the decomposition sequence, which shows that interaction effects merit further investigation.