Wealthy and Healthy in the South Pacific

Objectives- The main aim of this paper is to analyse the relationship between socio-economic status and health status at the household level in Fiji, a developing country in the South Pacific, based on original household survey data compiled by the authors Method- We exploit the geographic conditions of Viti Levu, the relatively small main island of Fiji, to isolate the effects of household wealth on health. For households on this island physical distance is not a significant impediment for access to health care and other publicly-provided services. We use a constructed index of household wealth in place of the more commonly used income measure of socio-economic status. To control for reverse causality and other possible sources of endogeneity we use an Instrumental Variable strategy in the regression analysis. Findings- We find that a household’s socio-economic status, as measured by a constructed wealth index, has a substantial impact on the household’s health status. We estimate that if a household's wealth increased from the minimum to the maximum level, this would decrease its probability of being afflicted by an incapacitating illness by almost 50 per cent. Conclusions- Health outcomes from existing health services can therefore be improved by raising the economic well-being of poor households. Conversely, the provision of additional health services alone may not necessarily improve health outcomes for the poorest.

Socioeconomic Status and Health Outcomes in a Developing Country

While the relationship between socioeconomic status (SES) and health is well documented for developed countries, less evidence has been presented for developing countries. The aim of this paper is to analyse this relationship at the household level for Fiji, a developing country in the South Pacific, using original household survey data. To allow for the endogeneity of SES status in the household health production function we utilize a simultaneous equation approach where estimates are achieved by full information maximum likelihood. By restricting our sample to one, relatively small island, and including area and district hospital effects, physical geography effects are unpacked from income effects. We measure SES, as permanent income which is constructed using principal components analysis. An alternative specification considers transitory household income. We find that a 1% increase in wealth (our measure of permanent income) would lead to a 15% decrease in the probability of an incapacitating illness occurring intra-household. While presence of a strong causal relationship indicates that relatively small improvements in SES status can significantly improve health at the household level, it is argued that the design of appropriate policy would also require an understanding of the various mechanisms through which the relationship operates.