Working Papers, Department of Economics, Lund University
No 2013:18:
Lost in Translation: Rethinking the InequalityEquivalence Criteria for Bounded Health Variables
Gustav Kjellsson and UlfG. Gerdtham ()
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
surplussharing 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 oneparameter IEC that,
unlike those implicit in commonly used indices, assigns constant weights to
the polar cases independent of the health distribution.
Keywords: health inequality; bounded variable; inequality equivalence criteria; (follow links to similar papers)
JELCodes: D63; I14; (follow links to similar papers)
23 pages, May 29, 2013, Revised January 2, 2014
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Kjellsson, Gustav and UlfG. Gerdtham, (2013), 'Lost in Translation: Rethinking the InequalityEquivalence Criteria for Bounded Health Variables', Research on Economic Inequality, Vol. 21, pages 332
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