The economic analysis of inequalities in health

Abstract

The paper explains the economist's concept of human capital, and uses it to analyse some of the problems raised in the Black Report on inequalities in health. Individuals are assumed to have an optimal 'stock' of health, defined as the level of stock for which the marginal benefits of further investment in the stock falls below its marginal cost. Differences in marginal benefits and costs between individuals will thus lead to differences in their health stocks. Use of this simple model and its associated concepts can be used to help explain, for instance, why social class differences in mortality are steepest in early adulthood and shallowest in the decade before retirement or why manual workers who 'need' more health than non-manual workers are nonetheless in general less healthy. The model can also contribute to the discussion of normative issues, for instance, to refine the concept of equality of access. However, while it has great potential in organising and analysing hypotheses concerning health behaviour, the model is in no way a substitute for other approaches; indeed it only becomes meaningful when interpreted in sociological, epidemiological and medical terms.

KIE: The economist's concept of human capital is explained and applied to some of the problems raised in the "Black Report," Inequalities in Health (London: Department of Health and Social Security; 1980). Individuals are assumed to have an optimal "stock" of health, defined as the level of stock for which the marginal benefit of further investment falls below its marginal cost for that individual. This "health stock" model can be used to help explain, for example, why social class differences in mortality are steepest in early adulthood and shallowest in the decade before retirement or why manual laborers who "need" more health than nonmanual workers are generally less healthy. It can also contribute to a discussion of normative issues, such as equality of access to health care.