This paper considers the problems which arise in seeking to measure socioeconomic inequalities in health when the health indicator is a categorical variable, such as self-assessed health. It shows that the standard approach - which involves dichotomizing the categorical variable - is unreliable. The degree of measured inequality is found to depend on the cut-off point chosen and the choice of cut-off point to affect the conclusions one can reach about trends in or differences in health inequality. The paper goes on to propose an alternative approach which involves constructing a latent health variable and then measuring inequalities in this latent variable by means of a variant of the health concentration curve.

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Health Economics
Erasmus School of Economics

Wagstaff, A, & van Doorslaer, E.K.A. (1994). Measuring inequalities in health in the presence of multiple-category morbidity indicators. Health Economics. doi:10.1002/hec.4730030409