Journal article

Calculating the concentration index when income is grouped

Philip Clarke, Tom Van Ourti

Journal of Health Economics | ELSEVIER | Published : 2010


The problem introduced by grouping income data when measuring socioeconomic inequalities in health (and health care) has been highlighted in a recent study in this journal. We re-examine this issue and show there is a tendency to underestimate the concentration index at an increasing rate when lowering the number of income categories. This tendency arises due to a form of measurement error and we propose two correction methods. Firstly, the use of instrumental variables (IV) can reduce the error within income categories. Secondly, through a simple formula for correction that is based only on the number of groups. We find that the simple correction formula reduces the impact of grouping and a..

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Funding Acknowledgements

We are grateful for comments received from Teresa Bago d'Uva, Hans van Kippersluis, an anonymous referee, and participants at seminars given at Australian National University, Tilburg University and Erasmus University Rotterdam. We also acknowledge funding from the NETSPAR project "Income, health and work across the life cycle" and thank EUROSTAT for access to the ECHP. Part of this research was undertaken while Tom Van Ourti was a Postdoctoral Fellow of the Netherlands Organisation for Scientific Research - Innovational Research Incentives Scheme - Veni. Philip Clarke is Supported by a Sydney University Fellowship. Part of this work was undertaken during a stay at the Melbourne Institute of Applied Economic and Social Research, and Economics RSSS at the Australian National University, the hospitality of which is gratefully acknowledged. The usual caveats apply and all remaining errors are our responsibility.