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Published on: April 7, 2011
An experimental test of the concentration index
Han Bleichrodt1, Kirsten I M Rohde, Tom Van Ourti
1Erasmus School of Economics, Rotterdam and Tinbergen Institute, Rotterdam, Netherlands. bleichrodt@ese.eur.nl
Journal of Health Economics
|February 7, 2012
Summary
The concentration index, used for health inequality, may not reflect social welfare as its core assumption is often violated. Decreases in income and health spread are preferred, but not necessarily reduced correlation.
Area of Science:
- Health Economics
- Social Epidemiology
- Public Health Policy
Background:
- The concentration index is a prevalent measure for assessing income-related health inequality.
- Its alignment with societal preferences for income and health distributions, and its reflection of social welfare, remain underexplored.
- Existing literature lacks consensus on whether reducing the concentration index truly enhances social welfare.
Purpose of the Study:
- To investigate the validity of the concentration index's underlying assumptions regarding social welfare.
- To evaluate alternative health inequality measures against societal preferences.
- To determine if reduced concentration index values correlate with increased social welfare.
Main Methods:
- Empirical testing of the central assumption of the concentration index.
- Assessment of societal preferences for income and health distribution changes.
- Validation of alternative health inequality metrics proposed in academic literature.
Main Results:
- The core assumption of the concentration index was found to be systematically violated in the data.
- Societal preferences favor reductions in the spread of both income and health.
- Preferences regarding the correlation between income and health were less consistent; decreases were not always favored.
Conclusions:
- The concentration index may not accurately represent social welfare due to violated assumptions.
- Societal valuation of health inequality is complex, involving both distribution spread and correlation.
- Alternative measures of health inequality may offer a more nuanced understanding of social preferences.
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