Health-related quality of life and compensating income variation for 18 health conditions in Iceland

ABSTRACT

Using data from an Icelandic health and well-being survey, carried out in 2007, 2009, and 2012, we estimate the value of health-related suffering in two different ways. Our primary aim is to obtain the monetary compensation needed to maintain the same level of well-being with and without 18 health conditions using the compensating-income-variation approach. This method employs individual well-being measures with no hypothetical situations involved, thus offering a solution to biases of frequently used methods to value non-marketed goods. We also use zero-one normalization of regression coefficients to estimate health-related quality-of-life weights. Results from monetary valuations indicate that 1,685,594 USD are needed per year to compensate for the presence of melancholy, 206,273 USD for frequent headaches, 153,396 USD for severely low vision, and 80,824 USD for severe monthly menstrual cramps. This research adds to the literature by employing two rarely used methods to a range of health conditions. By valuing several different conditions with the same sample and methodology this research provides a ranking between the conditions, aiding policy makers in prioritizing scarce resources. We do however advise against using the normalization method for policy purposes at this point, due to the deviation of results from the general literature.     

Income and well-being: an empirical analysis of the comparison income effect

This paper presents an empirical analysis of the importance of ‘comparison income’ for individual well-being or happiness. In other words, the influence of the income of a reference group on individual well-being is examined. The main novelty is that various hypotheses are tested: the importance of the own income, the relevance of the income of the reference group and of the distance between the own income and the income of the reference group, and most importantly the asymmetry of comparisons, i.e. the comparison income effect differing between rich and poor individuals. The analysis uses a self-reported measure of satisfaction with life as a measure of individual well-being. The data come from a large German panel known as GSOEP. The study concludes that the income of the reference group is about as important as the own income for individual happiness, that individuals are happier the larger their income is in comparison with the income of the reference group, and that for West Germany this comparison effect is asymmetric. This final result supports Dusenberry's idea that comparisons are mostly upwards.     

Who benefits from big government? A life satisfaction approach

Which impact does government size have on life satisfaction, and how do effects of bigger government differ between income groups in society? Previous studies typically employed country averages and thus neglected possibly heterogeneous happiness effects between income groups. This paper addresses empirically the effects of government spending on subjective well-being of individuals belonging to different income groups. Our analysis is based on individual data from 25 European countries participating in the European Social Survey. In contrast to most previous studies we take account of the endogeneity between relative income position and reported life satisfaction by an instrumental variable approach. Our results suggest, first, that most government spending categories, including social protection, are on average negatively related to individual well-being. Secondly, estimated marginal effects of health, education and social protection spending at different income levels show that spending increases always have a stronger negative effect on high income groups’ well-being than on low income groups’ life satisfaction. For all government spending categories, marginal happiness effects of higher public spending are clearly negative for income groups at the top.     

Infant mortality,relative income and public policy

Do health outcomes depend on relative income as well as on an individual's absolute level of income? We use infant mortality as a health status indicator and find a significant and positive link between infant mortality and income inequality using cross-national data for 93 countries. Holding constant the income of each of the three poorest quintiles of a country's population, we find that an increase in the income of the upper 20% of the income distribution is associated with higher, not the lower infant mortality. Our results are robust and not just caused by the concave relationship between income and health. The estimates imply a decrease in infant mortality by 1.5% for a one percentage point decrease in the income share of the richest quintile. The overall results are sensitive to public policy: public health care expenditure, educational outcomes, and access to basic sanitation and safe water can explain the inequality–health relationship. Thus, our findings support the hypothesis of public disinvestment in human capital in countries with high income inequality. However, we are not able to determine whether public policy is a confounder or mediator of the relationship between income distribution and health. Relative deprivation caused by the income distance between an individual and the individual's reference group is another possible explanation for a direct effect from income inequality to health.     

When income differences hurt or excite: The nonlinear effect of regional inequality on subjective wellbeing

Combining information from the European Union Statistics on Income and Living Conditions and the European Social Survey, we investigate the relationship between subjective well-being and income inequality using regional inequality indicators and individual data. We assume that inequality aversion and perception of social mobility affect the impact of regional inequality on subjective well-being in opposite directions. We find evidence of an inverse U-shaped effect of inequality, where inequality starts to have a positive effect on subjective well-being that becomes negative with a switch point before the average of the Gini index for the entire sample. The rationale for our nonlinear finding is that Hirschman's tunnel effect (and the positive effect of perceived social mobility) prevails for low levels of inequality, while inequality aversion and negative relative income effects are relatively stronger when inequality is higher. Robustness checks on different sample splits are consistent with the hypothesis of the two drivers.     

POOR AND SICK: ESTIMATING THE RELATIONSHIP BETWEEN HOUSEHOLD INCOME AND HEALTH

This study evaluates the effect of the individual's household income on their health at the later stages of working life. A structural equation model is utilized in order to derive a composite and continuous index of the latent health status from qualitative health status indicators. The endogenous relationship between health status and household income status is taken into account by using IV estimators. The findings reveal a significant effect of individual household income on health before and after endogeneity is taken into account as well as a host of other factors known to influence health, including hereditary factors and the individual's locus of control. Importantly, it is also shown that the childhood socioeconomic position of the individual has long lasting effects on health as it appears to play a significant role in determining health during the later stages of working life.     

The 2008/09 Economic Crisis: The Impact on Psychological Well-Being in the USA

The 2008/09 economic crisis has been the worst crisis of capitalism since the Great Depression. The causes and implications of the so-called “Great Recession” have been widely documented, but the effects of the crisis on psychological well-being have only received limited attention. Using state-level data, this paper aims to assess empirically the impact of the 2008/09 crisis on several indicators of mental health in the USA. The results indicate that unemployment and income levels have a significant and detrimental impact on mental health. This implies that social protection systems—and in particular labor market programs—play a paramount role in reducing the adverse impact of the crisis on mental health.     

A consistent multidimensional Pigou-Dalton transfer principle

The unidimensional Pigou-Dalton transfer principle demands that a regressive transfer in income—a transfer from worse-off (poor) to better-off (rich)—decreases social welfare. In a multidimensional setting the direct link between income (or any other attribute) and individual well-being is absent. We interpret the social welfare level of a distribution in which each individual has the same bundle as the individual well-being level. We define regressivity on the basis of this individual well-being ranking. In a setting with both transferable and non-transferable attributes, the imposition of the ensuing “consistent” Pigou-Dalton principle forces individual well-being to have a quasi-linear structure in the transferable attributes. Since we allow for transferable and non-transferable attributes, our result provides a normative underpinning for criteria in the distinct literatures of multidimensional inequality measurement (only transferable attributes) and of needs (one transferable and one non-transferable attribute).     

The Implications for Health,Depression, and Life Satisfaction from a Permanent Increase in Income for the Disadvantaged Elderly: Evidence from Taiwan

This paper uses an exogenous increase in income for a specific subgroup to explore the extent to which higher income leads to higher levels of health and well-being. In 1995, the Taiwanese government implemented the Senior Farmer Welfare Benefit Interim Regulation (SFWBIR) that was a pure cash injection to senior farmers. A difference-in-differences (DiD) approach is used on survey data from the Taiwanese Health and Living Status of Elderly in 1989 and 1996 to evaluate the short-term effect of the SFWBIR on self-assessed health, depression, and life satisfaction (LS). Senior manufacturing workers are employed as a comparison group for senior farmers in the natural experiment. This paper provides evidence that the increase in income caused by this pension reform significantly improved the mental health of senior farmers by reducing 1.697 points of the depression scale in DiD and 2.178 points in the robust estimation; however, it had no significant short-term impact on self-assessed health or LS.     

Nonlinear relationship between health care expenditure and its determinants: a panel smooth transition regression model

This paper employs a panel of 16 OECD countries over the period 1975–2009 to reexamine the health care expenditure (HCE)-income relationship by considering a lagged ratio of public expenditures on health as the transition variable in panel smooth transition regression (PSTR) models. PSTR models can capture the heterogeneity of any individual country, provide more detailed information for policy makers of an individual government, and resolve the insufficient observations problem that frequently appears in annual country-level data. Our empirical results indicate that the relationship between HCE and its determinants, including income, time (trend), and age structure variables, is nonlinear and varies with time and across countries. The time (trend) variable—a proxy for technical progress in health care—has a non-linear impact on HCE. Ignoring the variables—technological change of health care and age structure of population—will result in over-estimates of the income elasticities of HCE. Moreover, HCE behaves as a necessity good, and the income elasticity increases when the five-period lagged ratio of public expenditures on health increases. Clearly, the ratio of government financing on health plays an important role in influencing HCE.     

Income,health and health care utilization in the UK

The aim of this paper is to analyse the links between income, health and health care utilisation behaviour using longitudinal data from the British Household Panel Survey. The emphasis is to frame the analysis as a social phenomenon, so that the dynamics of individual health production in the social context can be understood. The study estimates the relationships between income, health and health care utilisation with lag effects. The empirical results support the hypothesis that these three variables influence each other with lag effects and that many social and economic factors influence an individual's probability of having a health problem or making use of health care facilities, even when such facilities are free at the point of use.     

Income growth,redistribution, and subjective well-being in Taiwan – a simulation study

This study simulates different income growth and income distribution scenarios in Taiwan in 2001, and examines how social happiness and people's happiness at different income levels change. Without taking downward comparison into consideration, the simulation supports income redistribution in favour of the poor. When the downward comparison is taken into consideration, the simulation does not support any kind of income redistribution. The present study investigates the relationship between income inequality and subjective well-being, and shows that a change in the Gini index can be interpreted in terms of a shift in revealed subjective well-being.     

A natural experiment of the effect of advertising on sales: the SASOL case

China's so-called ‘reform and opening up’ policy (Gai Ge Kai Fang), implemented nearly 30 years ago, has led to tremendous economic development. China's nominal Gross Domestic Product (GDP) was 3.25 trillion US dollars in 2007, making it the fourth largest economy in the world. At the same time, income inequality has become quite skewed in China, inviting considerable criticism. Moreover, the trend towards greater income inequality persists. Of particular public policy relevance is the effect of income inequality on health disparities in China, particularly for low-income households. This study addresses this issue using a longitudinal dataset from the China Health and Nutrition Survey (CHNS) over the period 1997 to 2006. Our central finding is that income inequality affects health differently by socioeconomic status: income inequality harms individual health among low income households by more than it does among high income households. More specifically, health is more adversely affected by greater income inequality for households with low incomes. China's central government is committed to making further investments in the health care system. As part of that effort, attention should be directed at low income households to reduce health inequality, possibly providing them with a health insurance safety net similar to Medicaid in USA.     

Optimistic income expectations and meeting those expectations: What matters for well-being in a developing country?

This paper examines the impact of income expectations and the extent to which these expectations are met, on subjective well-being. For the Indonesian sample, expectations had asymmetric effects on well-being, with pessimistic expectations having a strong adverse effect compared with a weak positive effect of optimism. Optimism improves only females' and not males' well-being while pessimism has the reverse effect on both genders' well-being. Although unmet expectations reduced well-being for all subgroups, the mediating role of social capital to negate this was limited to some subgroups. Results point toward a gendered policy agenda and the rural–urban divide to improve well-being.     

ECONOMIC RELATIONS BETWEEN WOMEN AND THEIR PARTNERS: AN EAST AND WEST GERMAN COMPARISON AFTER REUNIFICATION

abstract

This article compares women's and men's economic relations in East and West Germany following the 1990 reunification to exemplify the impact of varying opportunity structures on women's relative contribution to family income. West Germany's takeover set in motion a rapid transformation of East German institutions and employment structures. The analysis shows that women in West Germany became less dependent on their partners in the 1990s, largely because fewer women were housewives without earnings. In contrast, the contributions of women to the family economy in East Germany fell between 1990 and 1996. Afterwards, women in East Germany regained some of their economic power because of their partners' increasing difficulties sustaining employment. A multivariate analysis showed that the fact that women in West Germany were more likely to work less or not at all – especially if they were married or had children – accounted for much of the difference.     

Shocked by therapy? Unemployment in the first years of the socio-economic transition in Poland and its long-term consequences

We examine the long-term implications of unemployment for material conditions and well-being using the Polish sample from the Survey of Health, Ageing and Retirement in Europe (SHARE). Retrospective data from the SHARELIFE survey are used to reconstruct labour market experiences across the threshold of the socio-economic transformation from a centrally planned to a free market economy in Poland. These individual experiences are matched with outcomes observed in the survey about 20 years later to examine their correlation with unemployment at the time of the transition. We find that becoming unemployed in the early 1990s correlates significantly with income, assets and a number of measures of well-being recorded in 2007 and 2012. Using plant closures to reflect exogenous changes to labour market status at the time of the transition, we are able to confirm the causal effect of unemployment on income and house ownership 20 years later, but find no evidence for a long-term causal relationship between unemployment and such measures of well-being as life satisfaction, depression and subjective assessment of material conditions.     

Income inequality,corruption and subjective well-being

ABSTRACT

Based on the data of CGSS2013, we analyse the relationship between income inequality, corruption and subjective well being using an Ordered Probit model. Our results indicate that income inequality and corruption significantly reduces the subjective well-being of our country’s residents. Furthermore, corruption is an important channel for the negative effect of income inequality on subjective well-being, the impact of income inequality on subjective well-being is mainly achieved by the role of corruption. Specifically, the impacts vary according to hukou. Higher degree of income inequality indeed reduces the subjective well-being of urban residents, while it has a positive effect on subjective well-being of rural residents. Corruption has a significant negative impact on the subjective well-being of urban and rural residents. There is heterogeneity in the influence of different income levels in rural areas. The study in this paper shows that anti-corruption and narrowing the income gap are the two major grippers to improve the well-being of the residents.     

THE TIME LAG IN ANNUAL HOUSEHOLD-BASED INCOME MEASURES: ASSESSING AND CORRECTING THE BIAS

Annual income data are typically provided with a time lag. This article reviews several ways of dealing with this time lag in the construction of annual household-based income measures for individual economic well-being. It also proposes an alternative method that yields better estimates for equivalized household income, especially in the case of household composition change. Next, the two most commonly applied income measures are compared to this alternative measure with empirical income data from the European Community Household Panel. This comparison reveals that ignoring the time lag and household changes leads to substantial bias in income and poverty estimates and to erroneous conclusions about the determinants of poverty entry. The evidence in this article will be useful to researchers who want to make a well-informed choice between different annual income measures.     

Women's education and economic well-being

Evidence across regions in the world reveals patterns in school enrollment ratios and literacy that are divided along gender lines. In the developing world, apart from most countries in Latin America and the Caribbean, enrollment ratios of girls lag behind those for boys at all levels of education. Worldwide literacy rates for adult men far exceed those for women. While educational progress has been enjoyed by both sexes, these advances have failed to eradicate the gender gap. Education enhances labor market productivity and income growth for all, yet educating women has beneficial effects on social well-being not always measured by the market. Rising levels of education improve women's productivity in the home which in turn can increase family health, child survival, and the investment in children's human capital. The social benefits from women's education range from fostering economic growth to extending the average life expectancy in the population, to improving the functioning of political processes. This paper reviews recent empirical research that analyzes the benefits of women's education, describes the importance of women's education for country-level measures of economic development, and examines the implications of a gender gap in education for aggregate social well-being.     

Income, income inequality, and health: Evidence from China

This paper tests using survey data from China whether individual health is associated with income and community-level income inequality. Although poor health and high inequality are key features of many developing countries, most of the earlier literature has drawn on data from developed countries in studying the association between the two. We find that self-reported health status increases with per capita income, but at a decreasing rate. Controlling for per capita income, we find an inverted-U association between self-reported health status and income inequality, which suggests that high inequality in a community poses threats to health. We also find that high inequality increases the probability of health-compromising behavior such as smoking and alcohol consumption. Most of our findings are robust to different measures of health status and income inequality. Journal of Comparative Economics 34 (4) (2006) 668–693.