The role of circumstances in explaining health and income related inequalities in European countries

Marta Pasqualini, Sapienza Università di Roma
Donatella Lanari, Università di Perugia
Liliana Minelli, Università di Perugia
Luca Pieroni, Università di Perugia
Luca Salmasi, Università di Perugia

According to Roemer (1998) equality of opportunity in modern societies is reached when individuals’ accomplishments are completely determined by choices and effort. A recent paper by Milanovic (2014) demonstrated how 50% of variability in income of world population is determined by country of birth and income distribution within that country. Since health and income are generally strictly related because individuals who are better off financially tend to have better health and better health habits, we propose, in this paper, to estimate the variability in health that is determined by circumstances. We use data from the Survey of Health, Ageing and Retirement (SHARE) and the English Longitudinal Survey on Ageing (ELSA), two comparable multidisciplinary surveys that provide micro-level data on health and financial resources among the elderly for a large number of European countries. We used OLS regression models to estimate elasticities of various health and income outcomes to early-life conditions at the household, regional and country level. We find that early-life conditions are relevant in explaining variability in health and income in adult age, but with a more limited impact than what found by previous studies on income. Such differences could be attributed to the level of aggregation of the data used or to differences in income and health inequality levels.