Scandinavian Working Papers in Economics
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Department of Economics, Lund University Working Papers, Department of Economics, Lund University

No 2014:36:
A New Approach to Decomposition of a Bivariate Rank Dependent Index Using Recentered Influence Function Regression

Gawain A. Heckley (), Ulf-G. Gerdtham () and Gustav Kjellsson ()

Abstract: Decomposition of a bivariate rank dependent index, such as the concentration index, is commonly used to explain socioeconomic inequalities in health. We introduce a new decomposition technique based on the recentered influence function that yields the marginal effects of covariates on the bivariate rank dependent index. This technique is simple to estimate and interpret. We show that our method, compared to the current standard procedure, relies on the imposition of fewer conditions and is therefore preferable both in a descriptive setting and in the estimation of causal effects given a suitable identification strategy. In an empirical application using Swedish Twin Registry data, we illustrate that this result bears out in practice. The two methods yield contradicting results due to differences in the conditions imposed. Using a within twin pair fixed effects identification strategy, our new method finds no evidence of a causal effect of education on income-related health inequality.

Keywords: Health inequality; decomposition; rank-dependent index; recentered influence functions; Concentration index; (follow links to similar papers)

JEL-Codes: I10; I14; I30; (follow links to similar papers)

48 pages, November 18, 2014, Revised April 1, 2015

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This paper is published as:
Heckley, Gawain, Ulf-G. Gerdtham and Gustav Kjellsson, (2016), 'A general method for decomposing the causes of socioeconomic related inequality in health', Journal of Health Economics, Vol. 48, pages 89-106

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