Journal of Econometrics 112 (2003) 207 – 223

www.elsevier.com/locate/econbase

On decomposing the causes of health sector

inequalities with an application to malnutrition
inequalities in Vietnam
Adam Wagsta& a; b;∗ , Eddy van Doorslaerc , Naoko Watanabea
a The World Bank, 1818 H St. NW, Washington, DC, 20433, USA
b University of Sussex, Brighton, BN1 6HG, UK
c Erasmus University, 3000 DR Rotterdam, The Netherlands

Abstract
Inequalities across the income distribution in a variable y can be decomposed into their causes,
and changes in inequality in y can be decomposed into the e&ects of changes in the means
and inequalities in the determinants of y, and changes in the e&ects of the determinants of
y. Inequalities in height-for-age in Vietnam in 1993 and 1998 are largely accounted for by
inequalities in consumption and in unobserved commune-level in0uences. Rising inequalities are
largely accounted for by increases in average consumption and its protective e&ect, and rising
inequality and general improvements at the commune level.

c 2002 Elsevier Science B.V. All rights reserved.
JEL classi.cation: D30; I12

Keywords: Inequality; Decomposition; Malnutrition; Vietnam

1. Introduction

The large inequalities that exist in the health sector—between the poor and better-
o&—continue to be a cause for concern, in both the industrialized and the developing
worlds. These inequalities are manifest in health outcomes (see, e.g. Van Doorslaer et
al., 1997; Gwatkin et al., 2000; Wagsta&, 2000), the utilization of health services (see,
e.g. Gwatkin et al., 2000), and in the bene;ts received from public expenditures on
health services (see, e.g. Castro-Leal et al., 1999, 2000; Sahn and Younger, 2000).
In this paper, we present and apply some decomposition methods relevant to address-
ing three types of question. The ;rst concerns the causes of health sector inequalities

∗ Corresponding author. Tel.: +1-202-473– 0566; fax: +1-202-522-1153.

E-mail address: awagsta&@worldbank.org (A. Wagsta&).

0304-4076/02/$ - see front matter  c 2002 Elsevier Science B.V. All rights reserved.
PII: S 0 3 0 4 - 4 0 7 6 ( 0 2 ) 0 0 1 6 1 - 6
208 A. Wagsta2 et al. / Journal of Econometrics 112 (2003) 207 – 223

at a point in time. These inequalities stem from inequalities in the determinants of the
variable of interest. For example, inequality in health sector subsidies presumably re-
0ects inequalities in determinants of health service utilization (e.g., the quality of local
health facilities, access to them, opportunity costs, etc.) and inequalities in the per unit
subsidy (e.g. because of inequalities in liability for user fees). The issue arises: what
is the relative contribution of each of these various inequalities in explaining subsidy
inequalities? The second type of question concerns di&erences and changes in health
sector inequalities. Countries vary substantially in the degree of inequality in di&erent
health sector outcomes (see, e.g. Gwatkin et al., 2000), and there is evidence that
these inequalities have changed over time (see, e.g. Schalick et al., 2000; Victora et
al., 2000). The obvious question is why these di&erences exist and why these changes
have occurred. The third type of question in which we are interested concerns the
impacts of policies and programs. The fact that inequalities appear to have widened
over time in some countries does not mean necessarily that policies have been ine&ec-
tive, let alone that they have caused the growth of inequality. The decomposition we
present below can be useful in situations like this where one wants to separate out the
e&ects on inequality of various changes, including the e&ects associated with programs
that—inadvertently or otherwise—have e&ects on health sector inequalities.
In addition to presenting methods for unraveling the causes of health inequalities,
we illustrate their use by analyzing the causes of levels of and changes in inequalities
in child malnutrition in Vietnam over the period 1993–98. Whilst its child mortality
;gures are low by the standards of East Asia, Vietnam has a relatively high incidence
of child malnutrition—albeit one that is falling (World Bank et al., 2001). By contrast,
malnutrition inequalities were fairly small in Vietnam in 1993 by international standards
(Wagsta& and Watanabe, 2000), but they have been rising (World Bank et al., 2001).
The two empirical questions we seek to address, therefore, are: Why do inequalities in
child malnutrition exist in Vietnam? And why did inequality in child malnutrition rise
between 1993 and 1998?
The plan of the paper is as follows. In Section 2, we present the methods for
decomposing the causes of health sector inequalities, focusing initially on levels and
subsequently analyzing changes in inequality. In Section 3, we outline the empirical
model and data we use to decompose the causes of levels of and changes in malnutrition
inequalities in Vietnam. Section 4 presents and discusses our decomposition results, and
Section 5 contains our conclusions.

2. Decomposing health sector inequalities: methods

2.1. Measuring health sector inequalities

We denote by y the variable in whose distribution by socioeconomic status (SES),

we are interested. 1 The concentration curve, labeled L in Fig. 1, plots the cumulative

1 The approach developed here could be used for the case where one wants to look at pure health

inequality, in which case R would be the rank in the health distribution. The issue of which approach is
more appropriate, and which measure of SES to use in the approach adopted here, are ethical ones and
beyond the scope of this paper.
 A. Wagsta2 et al. / Journal of Econometrics 112 (2003) 207 – 223 209

100%
00

cumulative percent of y
L

0%
0% 100%
cumulative percent of people,
ranked by income

Fig. 1. Concentration curve.

proportion of y (on the vertical axis) against the cumulative proportion of the sample
(on the horizontal axis), ranked by income (or some other measure of SES), beginning
with the most disadvantaged person. If L lies above the diagonal, y is typically larger
amongst the worse-o&. The further L lies from the diagonal, the greater the degree of
inequality in y across the income distribution. The concentration index, denoted below
by C, is de;ned as twice the area between L and the diagonal (Wagsta& et al., 1991;
Kakwani et al., 1997). C can be written in various ways, one (Kakwani et al., 1997)
being
n
2

C= yi Ri − 1; (1)
n
i=1

where  is the mean of y, Ri is the fractional rank of the ith person in the income
distribution. C, like the Gini coeKcient, is a measure of relative inequality, so that a
doubling of everyone’s health leaves C unchanged. C takes a value of zero when L
coincides with the diagonal, and is negative (positive) when L lies above (below) the
diagonal. 2 In the case where y is a “bad”—like ill health or malnutrition—inequalities
to the disadvantage of the poor (higher rates amongst the poor) push L above the
diagonal and C below zero.

2.2. Decomposing health sector inequalities

Suppose, we have a linear regression model linking our variable of interest, y, to a

set of k determinants, xk :


yi = + k xki + i ; (2)
k

2 C could be zero if L crosses the diagonal. This does not happen in our empirical illustration, but even
if it did, C still provides a measure of the extent to which health is, on balance, concentrated amongst the
poor (or better-o&).
210 A. Wagsta2 et al. / Journal of Econometrics 112 (2003) 207 – 223

where the k are coeKcients and i is an error term. We assume that everyone in the
selected sample or subsample—irrespective of their income—faces the same coeKcient
vector, k . Interpersonal variations in y are thus assumed to derive from systematic
variations across income groups in the determinants of y, i.e., the xk . We have the
following result, which owes much to Rao’s (1969) theorem in the income inequality
literature (Podder, 1993), and which is proved in the appendix:
Result 1: Given the relationship between yi and xik in Eq. (2), the concentration
index for y, C, can be written as


C= ( k xOk =)Ck + GC =; (3)
k

where  is the mean of y, xOk is the mean of xk , and Ck is the concentration index for
xk (de;ned analogously to C). In the last term (which can be computed as a residual),
GC is a generalized concentration index for i , de;ned as
n
2

GC = i Ri ; (4)
n
i=1

which is analogous to the Gini coeKcient corresponding to the generalized Lorenz

curve (Shorrocks, 1983). Eq. (2) shows that C can be thought of as being made up
of two components. The ;rst is the deterministic component, equal to a weighted sum
of the concentration indices of the k regressors, where the weight or “share” for xk ,
is simply the elasticity of y with respect to xk (evaluated at the sample mean). The
second is a residual component, captured by the last term—this re0ects the inequality
in health that cannot be explained by systematic variation across income groups in
the xk .

2.3. Decomposing changes in health sector inequalities

The most general approach to unraveling the causes of changes in inequalities would
be to allow for the possibility that all the components of the decomposition in Eq. (3)
have changed and simply to take the di&erence of Eq. (3):



PC = ( kt xOkt =t )Ckt − ( kt−1 xOkt−1 =t−1 )Ckt−1 + P(GC t =t ): (5)
k k

This approach is somewhat uninformative. One might, for example, want to know
how far changes in inequality in health were attributable to changes in inequalities
in the determinants of health rather than to changes in the other in0uences on health
inequality. Furthermore, some changes (for example, changes in the mean of xk ) might
be o&set by other changes (for example, changes in the extent of inequality in xk ).
A slightly more illuminating approach would be to apply an Oaxaca-type decompo-
sition (Oaxaca, 1973) to Eq. (3). If we denote by kt the elasticity of y with respect
to xk at time t, and apply Oaxaca’s method, we get



PC = kt (Ckt − Ckt−1 ) + Ckt−1 (kt − kt−1 ) + P(GC t =t ); (6)
k k
 A. Wagsta2 et al. / Journal of Econometrics 112 (2003) 207 – 223 211

with the alternative being:

PC = kt−1 (Ckt − Ckt−1 ) + Ck (kt − kt−1 ) + P(GC t =t ): (7)
k k

This approach allows us to see—for each xk in turn or for all xk combined—the

extent to which changes in health inequalities are due to changes in inequality in the
determinants of health, rather than to changes in their elasticities.
Whilst more illuminating than Eq. (5), Eqs. (6) and (7) still conceal a lot. One cannot
disentangle changes going on within the elasticity kt . It may be that the change in
C owes far more to changes in k than to changes in the mean of xk , or vice versa.
Indeed, the components of kt may change in di&erent directions, possibly having
exactly o&setting e&ects. This would be especially worrisome if one’s interest lay in
the e&ects of a program thought to have in0uenced only one component of k (e.g.
one of the k ) at a time when one of the other components of k (e.g. the mean of
xk ) was also changing.
A third possibility is to take the total di&erential of Eq. (3), allowing for changes in
turn in each of the following: , the k , the xOk , and the Ck . We allow these changes
to alter C directly and indirectly through . Doing this, we obtain the following result,
which is also proved in the appendix:
Result 2: The change in C, PC, can be approximated by
dC
dC
dC
dC GC
dC = d + d k+ d xOk + dCk + d
d d k d xOk dCk 
k k k

C
xOk
k
=− d + (Ck − C) d k + (Ck − C) d xOk
  
k k

k xOk GC
+ dCk + d : (8)
 
k

From Eq. (8), it emerges that although does not enter the decomposition for levels,
i.e. Eq. (3), changes in do produce changes in C. Take the case where y is a
measure of good health, and has a positive mean and a positive C (good health is
concentrated amongst the better o&). In this case, dC=d ¡ 0. A rise in (d ¿ 0)
amounts to an equal increase in everyone’s health, and (relative) inequality in health
falls, in just the same way as an equal increase in income for everyone reduces relative
income inequality (Podder, 1993). The reduction in inequality is larger, the larger is
C and the smaller is . The case we consider in the empirical analysis is somewhat
di&erent–we look at inequality in ill health, our y-variable being an increasing function
of child malnutrition. We have a positive mean (average malnutrition is positive) and
a negative value of C (levels of malnutrition are higher amongst the poor). In this
case, dC=d ¿ 0. Suppose there is a reduction in (d ¡ 0). This amounts to an
equal reduction in everyone’s level of malnutrition, and the ;rst term on the RHS of
(8) is negative—i.e. C becomes more negative and inequality worsens. This is the
mirror image of the case where y is a measure of good health—there a given increase
in health represents a bigger proportional increase for poor people, while in the case
212 A. Wagsta2 et al. / Journal of Econometrics 112 (2003) 207 – 223

where y is a measure of ill health a given decrease in ill health represents a bigger
proportional reduction for better-o& people.
The second and third terms on the RHS of Eq. (8) show that the sign of the e&ect
on C of a change in k , or of a change in xOk , depends on whether xk is more or
less unequally distributed than y. These results re0ect two channels of in0uence—the
direct e&ect of the change in k (or xOk ) on C, and the indirect e&ect operating through
. If the variable in question is equally distributed (Ck = 0), the direct e&ect is zero.
Take the case where y is a measure of ill health, with positive mean and negative
concentration index. Assume xk also has a positive mean, and has a dampening e&ect
on ill health ( k ¡ 0). Consider the e&ect of a rise in xOk , holding constant the degree
of inequality in xk —i.e. an equiproportionate rise in xk . The direct e&ect of this change
is a reduction (in numerical value) in the size of C, the reason being that the existing
inequality in xk generates more inequality in y to the disadvantage of the poor. But
there is an additional e&ect, operating through the mean. The rise in xOk lowers average
ill health, which, holding all else constant, makes for more relative inequality in y
(i.e. makes for a more negative C). In this case, the two e&ects reinforce one another.
This will not always be so. Take the case where y is a measure of good health with
positive mean and concentration index. Assume xk contributes to good health and is
unequally distributed to the advantage of the better-o& (Ck ¿ 0). The direct e&ect of
an increase in xOk is to raise inequality (C becomes more positive), since the existing
inequality in xk generates more inequality in y. But the rise in xOk raises the mean of
y which, all else constant, lowers inequality in y. Whether the net e&ect of the rise
in xOk is to raise or lower inequality in y depends on whether xk is more unequally
distributed than y itself (i.e. whether Ck -C is positive or negative). Similar remarks
apply to the case of a change in k .
Finally, and more straightforwardly, an increase (decrease) in inequality in xk (i.e.
Ck ) will increase (reduce), the degree of inequality in y. The impact is an increasing
function of k and xOk , and a decreasing function of . So, for example, if y is increasing
in ill health, C ¡ 0, and xk reduces ill health, a rise in inequality in xk will make for
a reduction (in numerical size) in C (i.e. C becomes more negative).

3. Model, data and variable denitions

Our data are from the 1993 and 1998 Vietnam Living Standards Surveys (VLSS).
We focus on inequalities in stunting (low height-for-age), which we measure using
the negative of the child’s height-for-age z-score, with the US National Center for
Health Statistics (NCHS) data providing the reference. 3 We have two reasons for

3 Bhargava (2000) has shown that distributions of anthropometric scores can be sensitive to the reference
standards chosen. We therefore recomputed our 1998 results using a UK reference scale (Freeman et al.,
1995). Although the mean z-score changed slightly, the level of inequality was virtually identical to that
obtained using the US reference data—C was −0:110 rather than −0:099. The regression results were very
similar too, as inevitably were the decompositions. For example, the UK-based ;gures for the contribu-
tions of household consumption and commune ;xed e&ects for 1998 in Table 2 were −0:055 and −0:047,
respectively. Tables showing these results are available upon request from the authors.
 A. Wagsta2 et al. / Journal of Econometrics 112 (2003) 207 – 223 213

favoring the z-score over a binary variable indicating whether or not the child in
question was stunted (i.e. two standard deviations or more below the NCHS mean).
First, it conveys information on the depth of malnutrition rather than simply whether
or not a child was malnourished. Second, it is amenable to linear regression anal-
ysis (Lavy et al., 1996; Thomas et al., 1996; Ponce et al., 1998). This is essential
to our decomposition method. 4 The use of the z-score in the analysis of inequal-
ity does require that we accept the value judgment that “taller is always better”,
but this seems relatively innocuous. 5 We use the negative of the z-score to make
our malnutrition variable easier to interpret—it is increasing in malnutrition, and in
both years has a positive mean. 6 Like Ponce et al. (1998), we con;ne our atten-
tion to children under the age of ten, there being evidence that over the age of
nine genetic factors start to seriously constrain growth (Martorell and Habicht, 1986;
Kostermans, 1994). We have 5067 children under the age of ten in 1993, and 4796 in
1998. 7
Mean values of (the negative of) the height-for-age variable in the 1993 and 1998
samples were 2.036 and 1.608, respectively, indicating an appreciable improvement in
average nutritional status between 1993 and 1998. 8 To compute the concentration in-
dices, we ranked children by per capita household consumption in 1998 prices. 9 Our
concentration indices for 1993 and 1998 were −0:077 and −0:099, respectively, indicat-
ing a concentration of malnutrition amongst the poor in each year, and an appreciable
worsening in inequality between 1993 and 1998.
To explain variations in height-for-age, we adopt a standard household production-type
anthropometric regression framework (Lavy et al., 1996; Thomas et al., 1996; Ponce
et al., 1998; Alderman, 2000), in which the (negative of the) child’s height-for-age
z-score is speci;ed to be a linear function of a vector of child-level variables, X1 , a
vector of household-level variables, X2 , and a commune ;xed e&ect at the level of the

4 We are, in fact, able to introduce some nonlinearities—we have a squared term for one variable, and

enter another in logarithmic form.

5 The same cannot be said, of course, of the analogous value judgement for weight-for-age. For both

stunting and underweight, one could apply the methods outlined above with a malnutrition de;cit variable,
de;ned as the gap between the actual z-score and the threshold used to de;ne malnourished children (minus
two standard deviations below the mean of the original z-score). We did this in the case of stunting, and
obtained broadly similar results to those presented here.
6 Our method would break down if the mean were zero, which it would be if one used anthropometric

z-scores on the NCHS children. This group of children is not, however, a representative sample of the US
children, the NCHS data on children age 0 –36 months of age having been collected over a long period of
time from a population of middle-class, white, bottle-fed Americans. The problem of a zero mean even on
these children would not, of course, arise if one used a malnutrition de;cit variable rather than the z-score.
7 This excludes children with missing information on any of the variables included in the regression model.
8 We employed sample weights in computing the means for the 1998 survey, since the 1998 LSMS—unlike

the 1993 LSMS—is not representative without weights.

9 We also employed sample weights in generating the ranks in the consumption distribution for the 1998

data (they were unnecessary for the 1993 data). For both years, concentration indices were computed using
the convenient covariance method (Jenkins, 1988), using sample weights in the case of 1998.
214 A. Wagsta2 et al. / Journal of Econometrics 112 (2003) 207 – 223

child’s commune. 10 We interpret our estimating equation as a reduced-form demand

equation—rather than a production function—and estimate it using OLS. 11 ; 12
In the X1 vector we include the child’s age, age squared, and gender. Age entered
nonlinearly allows for the fact that Vietnamese children start o& in the early months
being close to the US reference in terms of height-for-age, but gradually fall behind
(Ponce et al., 1998). Including gender allows for the possibility of systematic di&erences
in stunting by gender. The vector X2 includes household living standards, measured by
the log of per capita household consumption, 13 dummy variables indicating whether
or not the child’s household had satisfactory drinking water and sanitation, 14 and
the years of schooling of the household head and the mother. These latter variables
are fairly standard covariates in anthropometric regressions (Alderman, 2000), and we
expect all to reduce malnutrition.

4. Results

4.1. Regression results

Table 1 shows the regression results for 1993 and 1998. The (joint) hypothesis of
time-invariant slope coeKcients is rejected at just over the 5% level, and the hypothesis

10 We had hoped to be able to isolate the contribution of inequalities in di&erent community-level variables,

but this proved impossible. Commune data were collected in both years, but only for communes in rural
areas (and, in 1998, small towns). Furthermore, the 1993 community survey was rather limited in scope
(Ponce et al., 1998). On top of this, health facility data were collected only for 1998, and even then were
collected only for a limited set of facilities, and only in rural areas.
11 We corrected standard errors both for heteroscedasticity and the e&ects of geographic clustering at the

commune level (Deaton, 1997). Sample weights were used in the model estimation for 1998 (they were not
required for the 1993 data).
12 The issue arises of whether household consumption—one of our X variables—is endogenous and there-
2
fore whether OLS is appropriate. There are various possible reasons why consumption might be endogenous,
the most obvious being that mothers may base their work decisions in part on the health and nutritional
status of their children, and that well-nourished children may be put to work (Ponce et al., 1998; Alderman,
2000). Consumption may also be subject to measurement error that is correlated with the error term .
Suppose one were to use instrumental variables (IV) instead of OLS. Then one would need to replace the
concentration index of consumption in Eq. (3) by the concentration index of predicted consumption from
the ;rst stage of the IV procedure. Furthermore, in order for the decomposition to hold, one would need to
re-rank children by their predicted consumption in the computation of all concentration indices, including that
of the malnutrition z-score. This would change the interpretation of the concentration index to be explained.
In e&ect, one would be explaining inequalities purged of any simultaneity and measurement error. Arguably
this might be a more interesting quantity to explain, but it is not actual inequality. Our results below are
therefore based on OLS, but we acknowledge that this is not an open and shut case.
13 The household consumption aggregates, taken from the 2000 version of the VLSS data ;les, were

produced by VLSS sta& using standard procedures, and in the case of the 1993 data were converted by
VLSS sta& in June 2000 to 1998 prices using region-speci;c price indices.
14 We have de;ned the drinking water and sanitation variables along the lines proposed by UNICEF

(Government of Vietnam, 2000). Safe drinking water was de;ned as: tap or standpipe; deep dug well with
pump; hand-dug well; or rain water. Satisfactory sanitation was de;ned as: 0ush toilet or latrine. Both
di&er slightly from the de;nitions used by UNICEF, because the categories in the VLSS data are somewhat
di&erent from those used by UNICEF.
 A. Wagsta2 et al. / Journal of Econometrics 112 (2003) 207 – 223 215

Table 1
Stunting regressions for 1993 and 1998

1993 1998

CoeKcient t-Stat CoeKcient t-Stat

Constant (mean commune ;xed e&ect) 3.008 6.401 2.468 5.396

Child’s age (in months) 0.038 14.163 0.039 11.630
Child’s age squared 0.000 −13.514 0.000 −10.938
Child = male 0.086 2.567 0.143 3.743
Household consumption −0.261 −4.042 −0.272 −4.652
Safe drinking water −0.023 −0.284 −0.081 −1.420
Satisfactory sanitation −0.128 −1.861 −0.050 −0.706
Years schooling household head −0.005 −0.814 −0.003 −0.513
Years schooling mother −0.012 −1.645 −0.001 −0.094
N 5067 4796
R2 0.188 0.247
F for regression 38.76 35.21
DF for F-test for regression 7; 4909 7; 4594
F commune ;xed e&ects = 0 2.91 2.98
DF for F-test for commune ;xed e&ects = 0 149; 4909 193; 4594
p for F-test for commune ;xed e&ects = 0 0.000 0.000

t-test with 9701 degrees of freedom to test hypothesis of no change in mean commune ;xed e&ect between
1993 and 1998: 45.61 (p = 0:000). Test is based on commune ;xed e&ects obtained from regression on
pooled sample. F-test with (8; 9503) degrees of freedom to test joint hypothesis of no change in slope
coeKcients is 1:98(p = 0:051). Test based on interactions between X -variables and time dummy in pooled
sample. Regressions undertaken using AREG routine in STATA with cluster option. Results for 1998 based
on weighted data. F-test for commune ;xed e&ects = 0 in 1998 computed with weights treated as analytic
weights and without clustering on communes.

of time invariance in the commune ;xed e&ects is decisively rejected. The mean of the
commune ;xed e&ects falls considerably between 1993 and 1998, and in each year the
hypothesis of zero commune ;xed e&ects is decisively rejected. Child’s age has a signif-
icant inverted u-shaped relationship in both years (reaching its peak at around 6 12 years
in 1998), with a slight strengthening of the relationship between 1993 and 1998. Boys
are more prone to stunting than girls, and the gender gap—holding all else constant—
apparently widened over the period 1993–98. Household consumption has a statistically
signi;cant negative e&ect on malnutrition in both years, but the e&ect was somewhat
stronger in 1998 than 1993. Safe drinking water reduces malnutrition in both years, but
the e&ect is stronger and closer to achieving statistical signi;cance in 1998. Satisfactory
sanitation also reduces malnutrition in both years, but the e&ect is smaller in 1998 and
is insigni;cant in that year. Parents’ education reduces malnutrition in both years, but
the e&ect has fallen—dramatically so in the case of mother’s education—and the larger
impact of mother’s education that is evident in 1993 is no longer evident in 1998.

4.2. Decomposition results

Table 2 shows the decompositions for the 2 years. The ;rst two columns under
the heading “contributions” make it clear that the bulk of inequality in malnutrition
 216

Table 2
Inequality decompositions for 1993 and 1998, and change 1993–98

CoeKcients Means Elasticities Concentration indices Contributions to C

1993 1998 1993 1998 1993 1998 1993 1998 1993 1998 Change

Child’s age (in months) 0.038 0.039 60.982 66.962 1.137 1.630 0.020 0.018 0.023 0.030 0.007
Child’s age squared 0.000 0.000 4883.834 5616.139 −0.634 −0.880 0.030 0.028 −0.019 −0.025 −0.006
Child = male 0.086 0.143 0.514 0.506 0.022 0.045 0.003 0.014 0.000 0.001 0.001
Household consumption −0.261 −0.272 7.300 7.611 −0.936 −1.288 0.038 0.040 −0.035 −0.052 −0.016
Safe drinking water −0.023 −0.081 0.221 0.331 −0.003 −0.017 0.312 0.256 −0.001 −0.004 −0.003
Satisfactory sanitation −0.128 −0.050 0.146 0.202 −0.009 −0.006 0.468 0.508 −0.004 −0.003 0.001
Years schooling household head −0.005 −0.003 6.812 7.108 −0.017 −0.015 0.065 0.094 −0.001 −0.001 0.000
Years schooling mother −0.012 −0.001 6.321 6.722 −0.037 −0.003 0.075 0.108 −0.003 0.000 0.003
Commune ;xed e&ects 3.008 2.468 1.477 1.534 −0.024 −0.031 −0.035 −0.047 −0.012
Total −0.075 −0.102 −0.027
A. Wagsta2 et al. / Journal of Econometrics 112 (2003) 207 – 223
 A. Wagsta2 et al. / Journal of Econometrics 112 (2003) 207 – 223 217

Table 3
Oaxaca-type decomposition for change in inequality, 1993–98

Eq. (6) Eq. (7) Total

PC PC PC PC Total %

Child’s age (in months) −0.003 0.010 −0.002 0.009 0.007 −30
Child’s age squared 0.001 −0.007 0.001 −0.007 −0.006 26
Child = male 0.000 0.000 0.000 0.000 0.001 −3
Household consumption −0.003 −0.013 −0.002 −0.014 −0.016 74
Safe drinking water 0.001 −0.004 0.000 −0.004 −0.003 16
Satisfactory sanitation 0.000 0.001 0.000 0.002 0.001 −5
Years schooling household head 0.000 0.000 −0.001 0.000 0.000 1
Years schooling mother 0.000 0.003 −0.001 0.004 0.003 −11
Commune ;xed e&ects −0.011 −0.001 −0.010 −0.002 −0.012 55
“Residual” 0.005 −24
Total −0.015 −0.012 −0.016 −0.012 −0.022

in both 1993 and 1998 was caused by inequalities in household consumption and
inequalities in the commune ;xed e&ects, both disfavoring the poor. In the case of
the commune ;xed e&ects, the inference is that in both years poor children lived in
communes that were likely to have characteristics that increased the likelihood of them
being malnourished. The contributions from inequalities in age (higher income groups
tend to have slightly older children) and age squared are evident, but the former is
almost totally o&set by the latter—the net e&ect of age in 1993 is equal to only 0.004
(i.e. 0.023– 0.019). Inequalities in drinking water, sanitation, and parental schooling all
disfavored the poor in both years, but their contributions to malnutrition inequalities
were fairly small, accounting in total for only −0:009 points of a total of −0:075 in
1993, and only −0:008 of a total of −0:102 in 1998.
The column headed “change” in the last column—the empirical analog of Eq. (5)—
indicates that the bulk of the deterioration in malnutrition inequality between 1993 and
1998 was due to changes in respect of household consumption and changes at the
commune level. The net change in respect of inequalities in child’s age was slightly
pro-poor—a change of +0.001. Changes in water and sanitation were in opposite di-
rections, with changes in respect of water actually making for more inequality in mal-
nutrition. Changes in respect of education of the household head were negligible, while
changes in respect of the mother’s education tended to narrow malnutrition inequalities
slightly. Even combined, however, these changes were small relative to the changes in
respect of household consumption and the commune ;xed e&ects.
What Eq. (5)—and its empirical counterpart in the ;nal column of Table 2—does
not enable us to see is how far these changes were due to changes in elasticities
rather than changes in inequality. The Oaxaca decomposition results in Table 3 allows
us to answer this question. For both household consumption and the commune ;xed
e&ects, changes in the elasticities and in inequality reinforce one another. In the former
case, Table 3 suggests it is the changing elasticity—rather than rising consumption
inequality—that accounts for the bulk of the rise in inequality associated with changes
218 A. Wagsta2 et al. / Journal of Econometrics 112 (2003) 207 – 223

Table 4
Total di&erential decomposition of change in inequality, 1993–98

’s Means of x’s CIs GC Total

Child’s age (in months) 0.003 0.011 −0.002 0.012

Child’s age squared 0.003 −0.010 0.001 −0.006
Child = male 0.001 0.000 0.000 0.001
Household consumption −0.005 −0.005 −0.002 −0.011
Safe drinking water −0.002 0.000 0.000 −0.003
Satisfactory sanitation 0.003 −0.002 0.000 0.001
Years schooling household head 0.001 0.000 −0.001 0.000
Years schooling mother 0.005 0.000 −0.001 0.004
Commune ;xed e&ects 0.000 −0.014 −0.010 −0.025
“Residual” 0.005 0.005
Total 0.010 −0.021 −0.016 0.005 −0.021
Column as % total −47% 98% 74% −25%

in respect of consumption. In the case of the commune ;xed e&ects, by contrast,

changing inequalities appear in Table 3 to be more important than changing elasticities.
Overall—taking the changes of all the determinants of malnutrition into account—the
rise in inequality in malnutrition is roughly equally attributable to changing elasticities
and changing inequalities in the determinants of malnutrition.
The total di&erential decomposition allows us to “drill down” still further and pin-
point the changes within the changes in the elasticities, and to explore the possibility
that the change in the elasticity might be small or even zero because of o&setting
changes within it—the coeKcient might rise, for example, while the mean of the de-
terminant could fall. It should be recalled that this decomposition is based on an
approximation and is accurate only for small changes. The fact that there are discrep-
ancies between the “Total” column in Table 4 and the “Change” column in Table 2
reminds us of this. These discrepancies are especially pronounced for household con-
sumption and the commune ;xed e&ects—unsurprising, given these are the major
drivers of rising malnutrition inequalities.
The total di&erential decomposition in Table 4 provides important additional informa-
tion to Table 2, by revealing that the relative contributions of the increased regression
coeKcient (in absolute size) and the increased mean consumption on the rise in the
consumption elasticity of malnutrition were similar in magnitude. The total di&erential
decomposition also uncovers the fairly large contribution to rising malnutrition inequal-
ity coming from the changes in the means of the commune ;xed e&ects, which was
actually larger in absolute size than the change attributable to widening inequalities in
the commune ;xed e&ects.
The total di&erential approach also helps us establish the magnitudes involved in
cases of largely o&setting changes in the various components of the elasticity. The
changes in respect of sanitation provide an example—albeit one that is not quantita-
tively very important. From Table 2, it is evident that a higher proportion of under-ten
children lived in households with satisfactory sanitation in 1998 than in 1993. This
 A. Wagsta2 et al. / Journal of Econometrics 112 (2003) 207 – 223 219

tended to worsen malnutrition inequalities (i.e. make C even more negative). But over
the same period, the protective e&ect of sanitation seems to have fallen. This e&ect
tended to narrow malnutrition inequalities. We know from the Oaxaca decomposition
that these e&ects roughly canceled each other out: PC is around 0.001 or 0.002,
depending on whether we use Eq. (6) or Eq. (7). What we do not know is the actual
magnitudes of their impacts on C. Table 4 tells us what these are, namely that the
change in the regression coeKcient made C rise by 0.003, while the increased coverage
made C fall by 0.002.
Table 4 also gives us an estimate of the overall impacts on malnutrition inequalities
of: (a) changes in regression coeKcients, (b) changes in the means of the determinants
of malnutrition, and (c) changes in the degree of inequality in the determinants of
malnutrition. Whilst changes in the means and inequalities of the determinants of mal-
nutrition have, on balance, tended to worsen inequalities in malnutrition, the opposite
is true, on balance, of changes in the slope coeKcients. There are, course, exceptions
to these patterns—changes in the regression coeKcients of consumption and drink-
ing water, for example, have tended to make malnutrition inequalities worse rather
than better. One take-home message from the bottom row of Table 4 is that without
the inequality-reducing e&ects of the changes in the regression coeKcients, inequality
in height-for-age would have changed by −0:036, rather than by −0:021. Another is
that changes in the degree of inequality in the determinants of malnutrition made C
change by −0:016, whereas the actual value of C changed by −0:021. There is, in
other words, more to rising inequalities in malnutrition than rising inequalities in its
determinants.

5. Conclusions and discussion

Our main aim in this paper has been to present some decomposition methods to
enable researchers to unravel the causes of health sector inequalities, and their change
over time, or variations across countries. Inequalities are caused by inequalities in the
determinants of the variable of interest, and our decomposition in Eq. (3) allows one
to assess the relative importance of these di&erent inequalities in generating inequalities
in the variable of interest. Changes over time in inequality in the variable of interest
can be due to changes in the degree of inequality in its determinants, or to changes in
the means of the various determinants, or to changes in their impact on the variable
of interest. The total di&erential decomposition in Eq. (8) allows one to disentangle
these three possible causes of changing inequality. The decomposition also alerts us
to a potential tradeo& between reducing relative inequality and improving the mean
of the variable of interest—a tradeo& discussed by Contoyannis and Forster (1999a,b)
and apparent in our empirical illustration. In the case we examined (inequalities in
malnutrition), rising incomes were found to reduce malnutrition and hence reduce av-
erage malnutrition. But rising incomes—holding income inequality constant—increase
relative inequality in malnutrition, directly by magnifying the inequality in malnutrition
attributable to income inequality, and indirectly by reducing mean malnutrition. The
decomposition is helpful in this regard, in that it allows one to see how much of the
220 A. Wagsta2 et al. / Journal of Econometrics 112 (2003) 207 – 223

rise in inequality in the variable of interest was associated with rising inequality in its
determinants (changes which will not have improved the mean) and how much of the
rise was due to changes in the means of the determinants or their impacts (changes
which may have improved the mean).
Our empirical results, whilst intended primarily as an empirical illustration, and sub-
ject to the usual caveats regarding the causal interpretation of cross-sectional results, are
of some interest in their own right. They suggest that inequalities in stunting amongst
young children in Vietnam in both 1993 and 1998 were due largely to inequalities in
household consumption and to inequalities in unobserved determinants at the commune
level (poor children living in areas that are not conducive to good health). They also
suggest that it was changes in these two factors that were largely responsible for the
rise in inequality in malnutrition over the period 1993–98.
In the case of household consumption, rising inequality accounted for only a small
part of the rise in malnutrition inequality. More important were the increases in aver-
age consumption and the protective e&ect of consumption on malnutrition. As far as
commune-level factors are concerned, the picture appears to have been one of an im-
provement overall in the commune-level determinants of malnutrition and an increase in
the inequality in their distribution. Both factors have made for more inequality in mal-
nutrition, with our estimates suggesting that the rise in inequality in the commune-level
determinants of malnutrition was slightly less important in terms of its impact on in-
equality in malnutrition. Overall, our results suggest that rising inequalities in stunting
owed most to changes in the means of the determinants of malnutrition, with rising
inequalities in the determinants of malnutrition being the next important factor. Com-
paratively little of the rise in inequality was attributable to changes in the impacts of
the various determinants.
How plausible are our empirical results? Rising consumption, increased coverage of
water and sanitation, and rising education levels have indeed all occurred in Vietnam
during the 1990s, and it is well known that these factors reduce malnutrition. It is
also known that inequality in consumption has risen somewhat (Glewwe et al., 2000)
and that inequality in educational attainment has risen (Wagsta& and Nguyen, 2002).
What is less clear is whether the changes attributable to changes in the regression
coeKcients and changes at the commune level are plausible. The former are in any
case fairly small, and the largest single factor is the change brought about by the
increased protective e&ect of household consumption. This seems fairly plausible. It
is true that the price of drugs has fallen considerably in real terms over the period
in question (World Bank et al., 2001), but several other changes seem likely to have
increased (in absolute terms) the marginal impact of household consumption levels on
nutritional outcomes. Examples in the health sector include rising user fees at pub-
lic health facilities and the growth of the private health sector (World Bank et al.,
2001). Changes in the market for foodstu&s have also resulted in a greater availability
and variety of food, so that households with suKcient resources now have the op-
portunity to purchase quality foodstu&s throughout the year. It also seems likely that
whilst, on balance, the commune-level determinants of malnutrition have improved,
these improvements have not been spread equally across poor and better-o& com-
munes. Elsewhere (Wagsta& and Nguyen, 2002) one of us has noted that in some
 A. Wagsta2 et al. / Journal of Econometrics 112 (2003) 207 – 223 221

respects the poor appear to be slipping backwards in respect of access to and uti-
lization of public health facilities. Vaccination and antenatal visit coverage grew more
slowly amongst the bottom three quintiles between 1993 and 1998, while the proportion
of newborns delivered by skilled birth attendants actually fell between 1993 and 1998
in the bottom three quintiles. In short, whilst intended to be primarily illustrative, our
results shed some light on the possible causes of rising inequalities in malnutrition in
Vietnam.

Acknowledgements

Without wishing to implicate them in any way, we are grateful to the following
for the helpful comments on an earlier version of the paper or research leading up to
it: three anonymous referees; Anne Case, Angus Deaton, Christina Paxson and other
participants at a seminar at Princeton; participants at the 2001 International Health Eco-
nomics Association Meeting in York; Harold Alderman, Alok Bhargava, Deon Filmer,
Berk Ozler, Martin Ravallion and Tom Van Ourti. The ;ndings, interpretations and
conclusions expressed in this paper are those of the authors, and do not necessarily
represent the views of the World Bank, its Executive Directors, or the countries they
represent.

Appendix A.

A.1. Proof of Result 1

Substitute Eq. (2) into Eq. (1) to obtain:

 n n n

2



C= n+ 1 x1i Ri + · · · + k xki Ri + i Ri − 1; (A.1)
n 2
i=1 i=1 i=1

since the mean of Ri is one half. Using Eq. (1) to obtain an equation for the concen-
tration index of xk yields

(Ck + 1)
xki Ri = nxOk : (A.2)
i
2

Substituting Eqs. (A.2) and (4) into Eq. (A.1) yields

 
2 (C1 + 1) (Ck + 1) n
C= n+ 1 nxO1 + · · · + k nxOk + GC − 1: (A.3)
n 2 2 2 2

We obtain Eq. (3) by expanding terms and bearing in mind that

= + k xOk :
k
222 A. Wagsta2 et al. / Journal of Econometrics 112 (2003) 207 – 223

A.2. Proof of Result 2

The derivatives in (8) can be obtained as (Podder, 1993)

dC dC d 1
= = − C;
d d d 
dC @C dC d xOk Ck xOk xOk
= + = − C = (Ck − C);
d k @ k d d k   
dC k
= (Ck − C);
d xOk 
dC k xOk
=
dCk 
Substituting these derivatives into Eq. (8) yields the desired result.

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