Health and Wealth Disparities in the United States by Jena Anupam B.;Phillipson Thomas J.;Sun Eric C.;Sun Eric; & Tomas J. Philipson & Eric C. Sun

Author:Jena, Anupam B.;Phillipson, Thomas J.;Sun, Eric C.;Sun, Eric; & Tomas J. Philipson & Eric C. Sun
Language: eng
Format: epub
ISBN: 667141
Publisher: AEI Press

Traditional methods of valuing disparities in well-being inherently assume that utility is a function of income only, so that V (Y, S) = V (Y). In this case, it is trivial to show that WTA is simply the difference in income between the two groups, so that WTA = Y ʹ – Y . However, equation (1) shows that when consumers value health in addition to income, WTA no longer equals the difference in incomes between the two groups. Indeed, if health is valued by individuals (mathematically, VS > 0), it is easy to show that if the wealthier group is also healthier (so that S ʹ > S ), then WTA will be larger than the difference in incomes, reflecting the fact that poorer individuals must be compensated for both the difference in incomes and the difference in health.3 We refer to WTA as the amount that equalizes the full income, or well-being, of both groups; this amount accounts for the value of both monetary income and health.

An important point to make is that WTA, the difference in full income or well-being between two groups, will rise with income, even when health is held constant. For example, suppose that whites live twice as long as blacks, and consider two cases: one where both groups earn $10,000 per year, and one where both groups earn $20,000 per year. Even though the black-white health differential is the same in these two cases, WTA will be higher in the second case because the incomes of both groups are higher. WTA rises with income because higher incomes increase consumption, thereby making an additional year of life more valuable. Since WTA naturally rises with income, our approach will be to represent WTA as a share of income Y. In other words, we report the relative amount (that is, the percentage) by which incomes of the poorer group must be increased to equate well-being with a richer group, as opposed to the absolute amount. Reporting the relative amount allows us to account for increases in income, thereby allowing us to compare WTA meaningfully over periods when incomes are changing.

Our basic approach toward calculating WTA adopts the framework developed by Becker, Philipson, and Soares (2005), who analyzed the impact of valuing improvements in longevity on cross-country convergence in economic welfare. Similar to these authors, we value the improvement in health for a given group (whether a particular state or racial group) by considering a hypothetical individual who represents the average person in that group. For a given year and group, this hypothetical individual is assumed to face both the cross-sectional (or period) survival and income for every year of his or her life. For example, to compare disparities between white and black males in 1970, our analysis would compare two hypothetical individuals. The first faces the cross-sectional survival of an average black male in 1970 and earns 1970 black male per-capita income every year of his life. The second faces the cross-sectional survival of an average white male in 1970 and earns 1970 white male per-capita income every year of his life.

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.