Decomposing Social Indicators Using Distributional Data

July 1995 Cross-country comparisons suggest that poor people tend to be in worse health than others?and that their health responds more to differences in public health spending. Are the poor less healthy? Does public health spending matter more to them? Bidani and Ravallion decompose aggregate health indicators using a random coefficients model in which the aggregates are regressed on the population distribution by subgroups, taking account of the statistical properties of the error term and allowing for other determinants of health status, including public health spending. This also allows them to test possible determinants of the variation in the underlying subgroup indicators. They implement the approach with data on health outcomes and poverty measures for 35 developing countries. Bidani and Ravallion find that poor people have appreciably worse health status on average than others---and that differences in public health spending tend to matter more to the poor. This is probably because the nonpoor are in a better position to buy private health care. This paper---a product of the Poverty and Human Resources Division, Policy Research Department---is part of a larger effort in the department to understand the interlinkage between poverty and human development.