Scandinavian Working Papers in Economics

Working Papers,
Lund University, Department of Economics

No 2019:7: What Kind of Inequality Do You Prefer? Evaluating Measures of Income and Health Inequality Using Choice Experiments

Hjördis Hardardottir (), Ulf-G. Gerdtham () and Erik Wengström ()
Additional contact information
Hjördis Hardardottir: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden
Ulf-G. Gerdtham: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden
Erik Wengström: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden

Abstract: When measuring inequality using conventional inequality measures, ethical assumptions about distributional preferences are often implicitly made. In this paper, we ask whether the ethical assumptions underlying the concentration index for income-related inequality in health and the Gini index for income inequality are supported in a representative sample of the Swedish population using an internet-based survey. We find that the median subject has preferences regarding income-related inequality in health that are in line with the ethical assumptions implied by the concentration index, but put higher weight on the poor than what is implied by the Gini index of income inequality. We find that women and individuals with a poorer health status put higher weight on the poor than men and healthier individuals. Ethically flexible inequality measures, such as the s-Gini index and the extended concentration index, imply that researchers have to choose from a toolbox of infinitely many inequality indices. The results of this paper are indicative of which indices (i.e. which parameter values) reflect the views of the population regarding how inequality should be defined.

Keywords: Socioeconomic inequality in health; Income inequality; Extended concentration index; S-Gini index; Distributional preferences

JEL-codes: D31; D63; D90; I14

60 pages, First version: April 26, 2019. Revised: May 31, 2019.

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