Understanding inequality in health and other expenditures in Kerala

Abstract

Abstract There is renewed interest in understanding economic inequality motivated by unprecedented extremes in the top shares of expenditure, income and wealth, worldwide. We present an empirical account of changes in household expenditure distributions and inequality in Kerala with particular emphasis on health expenditure. The analysis of data for a panel of households surveyed in 2004-5 and 2011-12 indicates that, overall, inequality in household expenditure and income in Kerala declined between those years, contrary to the widely held view. At the same time, inequality among households at the top end of the expenditure distribution is exceptionally extreme for health expenditures, to the point that an infinite population variance cannot be rejected. Conditioned on total household expenditure, health expenditure is highly unequal relative to other types of expenditures. Evidence suggests that households’ higher health expenses go hand in hand with curtailing other types of expenditures, and that the trade-off is more pronounced among households at the lower end of total household expenditure. Remarkably extreme upper-tail expenditure inequality that characterises quasi-public goods in Kerala carries implications for social welfare and health policy.