The importance of individual heterogeneity in the decomposition of measures of socioeconomic inequality in health: An approach based on quantile regression

This paper shows how recently developed regression-based methods for thedecomposition of health inequality can be extended to incorporateindividual heterogeneity in the responses of health to the explanatoryvariables. We illustrate our method with an application to the CanadianNPHS of 1994. Our strategy for the estimation of heterogeneous responsesis based on the quantile regression model. The results suggest that thereis an important degree of heterogeneity in the association of health toexplanatory variables which, in turn, accounts for a substantial percentageof inequality in observed health. A particularly interesting finding isthat the marginal response of health to income is zero for healthyindividuals but positive and significant for unhealthy individuals. Theheterogeneity in the income response reduces both overall health inequalityand income related health inequality.