Taxes & Transfers as Health Policy

Question 1

Theories about the origins of health inequality

Answer 1

1. Human capital theory
   a. Views health as a form capital that is both a consumption good (produced by the things we consume) and an investment good
   b. Wants to understand what produces health and what health produces, thinking of humans as rational actors
   c. We will try to maximize our health under some set of constraints, and these constraints are what determine health inequalities
2. Fundamental causes
   a. Health is multifaceted, but there are probably a set of causes that have an impact on all/most of health outcomes
   i. Poverty –> Mortality
   ii. Poverty can be linked with multiple risk factors that result in negative health outcomes
   iii. Health inequalities are persistent over time, so there is something about the distribution of resources in society that enables people in more privileged positions to deploy their resources more flexibly in the production of health
3. Selection mechanisms (e.g., intelligence)
   a. Health inequalities exist because, through various mechanisms, people in poor health end up in the poorer sectors of society
   b. Intelligence (g) as the confounding factor for poverty and health
4. Capabilities (see: Sen)
   a. Not necessarily interested in the set of outcomes people experience, but rather in their possibilities or capabilities
   i. Retaining the sense of individuality/preferences
   b. Things like status matter—an individual’s capacities/capabilities are shaped by how society views them
   c. What it means to have a ‘good life’ is contingent upon the country/society in which an individual is embedded
5. Political economy of health inequality
   a. Convergence of power, politics, economics

Question 2

Income inequality and health: mechanisms

Answer 2

Relative status in society
o Stress, other psychosocial factors

Extraction
o People at the bottom are poorer than they would have been in the absence of income inequality—the wealthy ‘extract’ resources from the poor
o ‘Rents’ – you get more resources than the market should give you because you are more able to access those resources

Share of growth (see: Piketty)
o In countries with larger income inequality, the wealthier receive a greater share of economic growth than the poor

Social institutions
o Some evidence to support that level of support for social institutions declines as income inequality rises – reduces sense of solidarity, social cohesion
o Income inequality pulls apart the ‘social fabric’ of society

Representation/democracy
o More weight is given to the preferences/values of some members of a democracy than others

Question 3

Do taxes and transfers improve health through reducing income inequality, or by increasing absolute resources (i.e., getting more money)?

Answer 3

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