Analyzing Health Equity Using

Household Survey Data

Lecture 8
Concentration Index

“Analyzing Health Equity Using Household Survey Data” Owen O’Donnell, Eddy van Doorslaer, Adam Wagstaff and
Magnus Lindelow, The World Bank, Washington DC, 2008, www.worldbank.org/analyzinghealthequity
 Can you compare the degree of inequality
in child mortality across these countries?
100%

Equality
80% Brazil
Cote d'Ivoire
Ghana
under-5 deaths

60% Nepal
cumul %

Nicaragua
Pakistan
Cebu
40%
S Africa
Vietnam

20% Brazil is most unequal,

but how do the rest compare?
0%
0% 20% 40% 60% 80% 100%
cumul % live births,
ranked by equiv consumption
“Analyzing Health Equity Using Household Survey Data” Owen O’Donnell, Eddy van Doorslaer, Adam Wagstaff and
Magnus Lindelow, The World Bank, Washington DC, 2008, www.worldbank.org/analyzinghealthequity
 Concentration index (CI)
100%
cum. % of under 5 deaths

75%

CI = 2 x area
50% between 450 line and
concentration curve

25% CI < 0 when variable

is higher amongst
poor
0%
0% 25% 50% 75% 100%

cum. % live births ranked by equivalent consumption

“Analyzing Health Equity Using Household Survey Data” Owen O’Donnell, Eddy van Doorslaer, Adam Wagstaff and
Magnus Lindelow, The World Bank, Washington DC, 2008, www.worldbank.org/analyzinghealthequity
Concentration indices for U5MR
0.1
C and 95% conf interval

0.0

-0.1

-0.2

-0.3

-0.4

-0.5

SE) 1987-92
1982-93

(Cebu) 1981-
Ghana 1978-

Nicaragua
South Africa
Cote d’Ivoire
1981-90

Nepal 1985-
Vietnam

Pakistan

Brazil (NE &

1983-88
1985-89

Phillipines
1978-89

96
89

91
“Analyzing
. Health Equity Using Household Survey Data” Owen O’Donnell, Eddy van Doorslaer, Adam Wagstaff and
Magnus Lindelow, The World Bank, Washington DC, 2008, www.worldbank.org/analyzinghealthequity
 Concentration index defined
100% C = 2 x area
between 450 line and concentration
cum. % of health variable

curve
= A/(A+B)
75%
C>0 (<0) if health variable is
disproportionately concentrated on
50% rich (poor)

Lh  p  A C=0 if distribution in proportionate

25% B C lies in range (-1,1)

0% C=1 if richest person has all of the

health variable
0% 25% 50% 75% 100%
C=-1 of poorest person has all of
cum. % population ranked by income the health variable

“Analyzing Health Equity Using Household Survey Data” Owen O’Donnell, Eddy van Doorslaer, Adam Wagstaff and
Magnus Lindelow, The World Bank, Washington DC, 2008, www.worldbank.org/analyzinghealthequity
 Some formulae for the concentration
index
1
C 1  2 Lh  p  dp
0

If the living standards variable is discrete:

2 n 1 where n is sample size, h the
C 
n i 1
hi ri  1 
n health variable, μ its mean and
r the fractional rank by income
For computation, this is more convenient:
2
C cov  h, r 

“Analyzing Health Equity Using Household Survey Data” Owen O’Donnell, Eddy van Doorslaer, Adam Wagstaff and
Magnus Lindelow, The World Bank, Washington DC, 2008, www.worldbank.org/analyzinghealthequity
Properties of the concentration index
• depend on the measurement characteristics of the health
variable of interest.
• Strictly, requires ratio scaled, non-negative variable
• Invariant to multiplication by scalar
• But not to any linear transformation
• So, not appropriate for interval scaled variable with
arbitrary mean
• This can be problematic for measures of health that are
often ordinal
• If variable is dichotomous, C lies in the interval (μ-1, 1-μ)
(Wagstaff, 2005):
– So interval shrinks as mean rises.
– Normalise by dividing C by 1-μ

“Analyzing Health Equity Using Household Survey Data” Owen O’Donnell, Eddy van Doorslaer, Adam Wagstaff and
Magnus Lindelow, The World Bank, Washington DC, 2008, www.worldbank.org/analyzinghealthequity
 Erreygers (2006) modified
concentration index
 Where bh and ah are the max and min
E h  4 C h of the health variable (h)
bh  ah
• This satisfies the following axioms:
– Level independence: E(h*)=E(h), h*=k+h
– Cardinal consistency: E(h*)=E(h), h*=k+gH,
k>0, g>0
– Mirror: E(h)=-E(s), s=bh-h
– Monotonicity
– Transfer

“Analyzing Health Equity Using Household Survey Data” Owen O’Donnell, Eddy van Doorslaer, Adam Wagstaff and
Magnus Lindelow, The World Bank, Washington DC, 2008, www.worldbank.org/analyzinghealthequity
Interpreting the concentration index
• How “bad” is a C of 0.10?
• Does a doubling of C imply a doubling of
inequality?
• Koolman & van Doorslaer (2004) –
– 75C = % of health variable that must be
(linearly) transferred from richer to poorer half
of pop. to arrive at distribution with a C of zero
– But this ensures equality of health predicted by
income rank and not equality per se

“Analyzing Health Equity Using Household Survey Data” Owen O’Donnell, Eddy van Doorslaer, Adam Wagstaff and
Magnus Lindelow, The World Bank, Washington DC, 2008, www.worldbank.org/analyzinghealthequity
 Inequality is not simply correlation
• Milanovic (1997) decomposition for Gini
can be adapted for concentration index:
12 r  h
2
C    h, r 
3 
• C is (scaled) product of coefficient of
variation     and correlation   h, r 
h

– C captures both association and variability

– C is a covariance scaled in interval [-1,1]
– same association can imply different inequality
depending on variability
“Analyzing Health Equity Using Household Survey Data” Owen O’Donnell, Eddy van Doorslaer, Adam Wagstaff and
Magnus Lindelow, The World Bank, Washington DC, 2008, www.worldbank.org/analyzinghealthequity
 Total inequality in health and
socioeconomic-related health inequality
100%
By definition, the
80%
health Lorenz curve
must lie below the
cum % of health

60% concentration curve.

40%
That is, total health
20%
inequality is greater
than income-related
0% health inequality.
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

cum % of pop, ranked by health or income

diagonal Lorenz curve Conc curve

“Analyzing Health Equity Using Household Survey Data” Owen O’Donnell, Eddy van Doorslaer, Adam Wagstaff and
Magnus Lindelow, The World Bank, Washington DC, 2008, www.worldbank.org/analyzinghealthequity
 Total inequality in health is larger than
socioeconomic-related health inequality
Gini index of total health inequality 2
G  cov(h , rh )
rh is rank in health distribution 
Then G  cov(h , rh )  1
C cov(h , r )

Thus, G = C + R, where R>=0 and measures the outward move from

the health concentration curve to the health Lorenz curve, or the
re-ranking in moving from the SES to the health distribution

“even if the social class gradient was magically eliminated,

dispersion in health outcomes in the population would remain
very much the same”
Smith J, 1999, Healthy bodies and thick wallets”, J Econ Perspectives
“Analyzing Health Equity Using Household Survey Data” Owen O’Donnell, Eddy van Doorslaer, Adam Wagstaff and
Magnus Lindelow, The World Bank, Washington DC, 2008, www.worldbank.org/analyzinghealthequity
 Computing concentration index with
grouped data
C  ( p1L2  p2 L1 )  ( p2 L3  p3 L2 )  ...  ( pT 1LT  pT LT 1 )

Under-5 deaths in India

pt Lt (pt-1Lt-ptLt-1)
Wealth No. of rel % cumul % U5MR No. of rel % cumul % Conc.
group births births births per 1000 deaths deaths deaths Index

0% 0%
Poorest 29939 23% 23% 154.7 4632 30% 30% -0.0008
2nd 28776 22% 45% 152.9 4400 29% 59% -0.0267
Middle 26528 20% 66% 119.5 3170 21% 79% -0.0592
4th 24689 19% 85% 86.9 2145 14% 93% -0.0827
Richest 19739 15% 100% 54.3 1072 7% 100% 0.0000
Total/average 129671 118.8 15419 -0.1694

“Analyzing Health Equity Using Household Survey Data” Owen O’Donnell, Eddy van Doorslaer, Adam Wagstaff and
Magnus Lindelow, The World Bank, Washington DC, 2008, www.worldbank.org/analyzinghealthequity
 Estimating the concentration index
from micro data
• Use “convenient covariance” formula C=2cov(h,r)/μ
– Weights applied in computation of mean, covar and rank

• Equivalently, use “convenient regression”

2  hi 
2 r       ri   i

– Where the fractional rank (r) is calculated as follows if there are weights (w)
i 1
wi
ri   w j  , w0  0
j 0 2

– OLS estimate of β is the estimate of the concentration index

“Analyzing Health Equity Using Household Survey Data” Owen O’Donnell, Eddy van Doorslaer, Adam Wagstaff and
Magnus Lindelow, The World Bank, Washington DC, 2008, www.worldbank.org/analyzinghealthequity
 Standard error of the estimate of the
concentration index
• Kakwani et al (1997) provide a formula for delta-
method SE
– But formula does not take account of weights or sample
design
• Could use the SE from the convenient regression
– Allows adjustment for weights, clustering, serial
correlation, etc
– But that does not take account of the sampling variability
of the estimate of the mean

“Analyzing Health Equity Using Household Survey Data” Owen O’Donnell, Eddy van Doorslaer, Adam Wagstaff and
Magnus Lindelow, The World Bank, Washington DC, 2008, www.worldbank.org/analyzinghealthequity
 Delta method standard error from
convenient regression
To take account of the sampling variability of the
estimate of the mean, run this regression hi 1  1ri  ui

Estimate the concentration index from ˆ   2 2

 ˆ
 ˆ  1
r

  
Or using the properties of OLS  
 2 2 
ˆ   r
 ˆ1
 ˆ  ˆ1
This estimate is a non-linear 
function of the regression  1 
 2 
coeffs and so its standard error can be obtained by the
delta method.
“Analyzing Health Equity Using Household Survey Data” Owen O’Donnell, Eddy van Doorslaer, Adam Wagstaff and
Magnus Lindelow, The World Bank, Washington DC, 2008, www.worldbank.org/analyzinghealthequity
 Demographic standardization of the
concentration index
• Can use either method of standardization
presented in lecture 5 & compute the C index
for the standardized distribution
• If want to standardized for the total correlation
with demographic confounding variables (x),
then can do in one-step
• OLS estimate of β2 is indirectly standardized
concentration index 2 2  hi     r   x  
r  2 2 i  j ji i
  j

“Analyzing Health Equity Using Household Survey Data” Owen O’Donnell, Eddy van Doorslaer, Adam Wagstaff and
Magnus Lindelow, The World Bank, Washington DC, 2008, www.worldbank.org/analyzinghealthequity
 Sensitivity of the concentration
index to the living standards measure
• C reflects covariance between health and rank in
the living standards distribution
• C will differ across living standards measures if
re-ranking of individuals is correlated with health
(Wagstaff & Watanabe, 2003)
 hi 
From OLS estimate of 2       ri   i 2
r
 
where ri  r1i  r2i is the re-ranking and  2r its variance,

the difference in concentration indices is

C1  C2  ˆ
“Analyzing Health Equity Using Household Survey Data” Owen O’Donnell, Eddy van Doorslaer, Adam Wagstaff and
Magnus Lindelow, The World Bank, Washington DC, 2008, www.worldbank.org/analyzinghealthequity
 Evidence on sensitivity of
concentration index
Wagstaff & Watanabe (2003) – signif. difference b/w C estimated
from consumption and assets index in only 6/19 cases for
underweight and stunting
But Lindelow (2006) find greater sensitivity in concentration
indices for health service utilization in Mozambique
Consumption Asset index
Difference t-value for
CI t-value CI t-value CIC – CIAI difference

Hospital visits 0.166 8.72 0.231 12.94 -0.065 -3.35

Health center visits 0.066 3.85 -0.136 -8.49 0.202 9.99

Complete immunizations 0.059 8.35 0.194 34.69 -0.135 -19.1

Delivery control 0.063 11.86 0.154 35.01 -0.091 -15.27

Institutional delivery 0.089 11.31 0.266 43.26 -0.176 -20.06