Inequality of opportunity in health: A decomposition-based approach

This paper presents new decomposition-based approaches to measure inequality of opportunity in health that capture Roemer's distinction between circumstances and effort and are consistent with both compensation and reward principles. Our approach is fully nonparametric in the way that it handles differences in circumstances and provides decompositions of both a rank-dependent relative (the Gini coefficient) and a rank-independent absolute inequality index (the variance). The decompositions distinguish the contribution of effort from the direct and indirect (through effort) contribution of circumstances to the total inequality. Our approach is illustrated by an empirical application that uses objectively measured biomarkers as health outcomes and as proxies for relevant effort variables. Using data from the Health Survey for England from 2003 to 2012, we find that circumstances are the leading determinant of inequality in cholesterol, glycated haemoglobin, and in a combined ill-health index whereas effort plays a substantial role in explaining inequality in fibrinogen only.