Wealthy and Healthy in the South Pacific

Abstract

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.