Incorporating concepts of inequality and inequity into health benefits analysis

We conclude that an inequality indicator for health benefits analysis should not decrease when risk is transferred from a low-risk to high-risk person, and that it should decrease when risk is transferred from a high-risk to low-risk person (Pigou-Dalton transfer principle), and that it should be able to have total inequality divided into its constituent parts (subgroup decomposability). We additionally propose that an ideal indicator should avoid value judgments about the relative importance of transfers at different percentiles of the risk distribution, incorporate health risk with evidence about differential susceptibility, include baseline distributions of risk, use appropriate geographic resolution and scope, and consider multiple competing policy alternatives. Given these criteria, we select the Atkinson index as the single indicator most appropriate for health benefits analysis, with other indicators useful for sensitivity analysis. Our illustrative pollution control example demonstrates how these indices can help a policy maker determine control strategies that are dominated from an efficiency and equality standpoint, those that are dominated for some but not all societal viewpoints on inequality averseness, and those that are on the optimal efficiency-equality frontier, allowing for more informed pollution control policies.