Explaining the Health Equality Paradox of the Welfare State

Kjell Arne Brekke, Leo A. Grünfeld () and Snorre Kverndokk
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Leo A. Grünfeld: Oslo School of Management & MENON Business Economics, Postal: P.O. Box 5250 Majorstuen, 0303 Oslo, Norway

No 2011:3, HERO Online Working Paper Series from University of Oslo, Health Economics Research Programme

Abstract: A growing body of empirical studies have reported that social inequalities in health are as large (or even larger) in the Nordic welfare states than in many less egalitarian societies. This is highly surprising since the welfare state is rooted in income equality, free access to education and health services, and a generous social benefit system. This paper reviews this literature, and provides an explanation of this paradox based on the most common causal mechanism studied, namely the one that goes from income (or another socio economic variable) to health.

We start by showing that the concentration index is much more sensitive to health contingent income transfers than income contingent health transfers. Then, we introduce a simple model where health is caused by status (relative income) and show that there actually exists as possibility that stratified societies may have lower health inequality than egalitarian societies, everything else equal, if class is unobservable. Thus, there may be a tradeoff between income and health equality. However, due to the insensitivity of the concentration index of health transfers, this tradeoff may not be shown by such inequality measures. A higher social health inequality as found in empirical studies, may therefore just be a sign of a more equal income distribution.

Keywords: Income inequality; health inequality; socioeconomic status; welfare states; concentration index (search for similar items in EconPapers)
JEL-codes: D31 I12 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2011-10-25
New Economics Papers: this item is included in nep-hea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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