Accounting for risk factors on health outcomes: The case of Luxembourg

Abstract

This paper proposes a two-parameter family of health indicators. First, these operational research indicators are axiomatically derived and allow a Boolean risk factor to be linked to different health dimensions. Second, the behavior of the social planner with respect to the risk factor (risk insensibility, risk sensibility and extreme risk sensibility) is introduced. We demonstrate that these indicators are consistent with a stochastic dominance rule, which is an operational research rule for decision making. Using data from the Survey of Health, Ageing and Retirement in Europe, we show that, among the different childhood circumstances of individuals having an impact on the health status in adulthood, having parents with a migration background and low educated constitutes the risk factors that aggravate the most the overall level of socio-economic health inequality in Luxembourg.