1. Paola Salardi, The Estimation of the Health Functioning Production Function for Brazil, Oxford 2009 Conference “New Directions in Welfare”, 29 June – 1 July The Estimation of the Health Functioning Production Function for Brazil Paola Salardi p.salardi@sussex.ac.uk p.salardi@sussex.ac.uk

2. The Motivation of this Research Little has been done to deepen the analysis of functionings-resources conversion process from both the theoretical and empirical perspectives in the context of the capability approach. Understanding the functionings-resources conversion process might be a valuable tool for the policy maker. The policy maker might be interested in how individuals convert their resources into achieved functionings. Paola Salardi, The Estimation of the Health Functioning Production Function for Brazil, Oxford 2009 Conference “New Directions in Welfare”, 29 June – 1 July

3. The Aim of the Paper To estimate the health functioning production function for Brazil in order to assess differences in ability of individuals to achieve good health outcomes. The health functioning production function defines the relation between the achievement of the functioning “being healthy” and a set of private and public resources controlling for a set of exogenous characteristics. functioning-resources conversion process conversion factors conversion rates Paola Salardi, The Estimation of the Health Functioning Production Function for Brazil, Oxford 2009 Conference “New Directions in Welfare”, 29 June – 1 July

4. The Structure of the Presentation Literature review The economic framework Data and variables description Empirical findings Policy implications Further steps Paola Salardi, The Estimation of the Health Functioning Production Function for Brazil, Oxford 2009 Conference “New Directions in Welfare”, 29 June – 1 July

5. Literature review (I) Health economics literature: –Demand for health and the HH health production function: Grossman (1972), Rosenzweig and Schultz (1983), Schultz (1984); –Impact of socio-economic determinants of health: Thomas, Lavy and Strauss (1996), Lavi et al (1996), Rivera (2001), Zhao and Bishai (2003), Mohindra, Haddad and Narayana (2006, 2008); –Specifically on Brazil: Thomas, Strauss and Henriques (1990, 1991), Sastry (1996), Kassouf and Sanauer (1996); –Socio-economic gradient: Marmot and Shilpey (1996), Case (2000) Deaton (1999, 2000), Hildebrand and van Kerm (2005), Foster and Ray (2006), Li and Zhu (2006). Paola Salardi, The Estimation of the Health Functioning Production Function for Brazil, Oxford 2009 Conference “New Directions in Welfare”, 29 June – 1 July

6. Literature review (II) Capability approach literature: –Health as part of a multidimensional concept of well-being: Anand (2004), Nussbaum (2000), Anand (2005), Anand, Hunter and Smith (2005), Anand et al (2006); –Health and disability: Zaidi and Burchardt (2005), Mitra (2006), Jones and Mitra (2006); –Operationalization of CA in estimating well-being: Sen (1985), Robeyns (2003, 2005), Robeyns and Kuklys (2004); –Estimating health in the context of the CA: Kuklys (2005), Martin (2006), Destefanis and Sena (2006), Chiappero- Martinetti and Salardi (2009). Paola Salardi, The Estimation of the Health Functioning Production Function for Brazil, Oxford 2009 Conference “New Directions in Welfare”, 29 June – 1 July

7. The Economic Framework (I) The “utilization function” introduced by Sen (1985) Kuklys’s (2005) novelty of the inclusion of conversion factors in the analytical formulation of the conversion process Chiappero, Grasso and Pareglio (2007) offer a more complex framework where well-being is generated by both private and public resources. We follow Kuklys in stressing the importance of conversion factors but our ultimate interest is in assessing the rates of conversion for both private and public resources that prevail after accounting for these different conversion factors. Paola Salardi, The Estimation of the Health Functioning Production Function for Brazil, Oxford 2009 Conference “New Directions in Welfare”, 29 June – 1 July

8. The Economic Framework (II) The health functioning production function is given by Hij is the achievement of the health functioning for person i living in the geographical area j Wij is the wealth index Gj is the index for public goods and services zij are internal conversion factors zj are external conversion factors Paola Salardi, The Estimation of the Health Functioning Production Function for Brazil, Oxford 2009 Conference “New Directions in Welfare”, 29 June – 1 July

9. Data and Variables Description (I) The annual Brazilian households survey, Pesquisa Nacional por Amostra do Domicilios (PNAD), for 2003 collected by the Instituto Brasileiro de Geografia e Estatistica (IBGE). This Brazilian household survey has been integrated with regional data on public health services coming from the so-called Datasus dataset provided by the Brazilian Minister of Health. Paola Salardi, The Estimation of the Health Functioning Production Function for Brazil, Oxford 2009 Conference “New Directions in Welfare”, 29 June – 1 July

10. Data and Variables Description (II) Dependent variables: - SMRI (self-reported morbidity index) - SHSI (subjective health status indicator) Resources: - wealth indicator (proxy for private resources) - public resources index Conversion factors: - personal characteristics (gender, age, ethnicity, education) - labour market characteristics (farmer, occupational levels, formal sector) - geographical characteristics (macro- regions, urban, Brasilia, São Paulo, Roraima, Acre) Paola Salardi, The Estimation of the Health Functioning Production Function for Brazil, Oxford 2009 Conference “New Directions in Welfare”, 29 June – 1 July

11. Data and Variables Description (III) FIGURE 1. The incidence of SRMI and SHSI Paola Salardi, The Estimation of the Health Functioning Production Function for Brazil, Oxford 2009 Conference “New Directions in Welfare”, 29 June – 1 July

12. Empirical findings (I) TABLE V. Marginal effects of Probit estimates using SRMI (1)(2)(3)(4) Private and public resources Wealth2-0.007-0.006 (0.002)***(0.003)** Wealth3-0.010-0.009-0.008 (0.003)*** Wealth4-0.015 (0.002)*** Wealth5-0.021-0.020 (0.004)*** Public-0.024-0.023-0.014 (0.002)*** (0.005)*** Wealth2*Public-0.013 (0.005)** Wealth3*Public-0.013 (0.005)*** Wealth4*Public-0.009 (0.006) Wealth5*Public-0.011 (0.007) (other covariates omitted) Observations128,028 Pseudo-R20.04360.04310.04490.0450 Robust standard errors adjusted for clustering on Unidade de Federacão in parentheses * significant at 10%; ** significant at 5%; *** significant at 1% Paola Salardi, The Estimation of the Health Functioning Production Function for Brazil, Oxford 2009 Conference “New Directions in Welfare”, 29 June – 1 July

13. Empirical findings (II) TABLE VI. Ordered probit estimates using SHSI (1)(2)(3) Private and public resources Wealth20.0710.067 (0.021)***(0.019)*** Wealth30.1650.161 (0.026)*** Wealth40.2750.271 (0.024)*** Wealth50.5130.508 (0.024)***(0.025)*** Public0.2440.226 (0.031)***(0.032)*** (other covariates omitted) /Cut1-2.365-2.525-2.367 0.1050.1080.105 /Cut2-1.098-1.27-1.099 0.1090.1110.109 Observations128,028 Pseudo-R 2 0.09770.09080.0984 Robust standard errors adjusted for clustering on Unidade de Federacão in parentheses * significant at 10%; ** significant at 5%; *** significant at 1% Paola Salardi, The Estimation of the Health Functioning Production Function for Brazil, Oxford 2009 Conference “New Directions in Welfare”, 29 June – 1 July

14. Empirical findings (III) TABLE VII. Marginal effects of Probit estimates using SRMI by gender and race (1)White women(2)White men(3)Non-white women (4)Non-white men Private and public resources Wealth2-0.001-0.006-0.005-0.009 (0.007)(0.005)(0.003)*(0.004)*** Wealth3-0.002-0.013-0.010-0.007 (0.005)(0.006)**(0.004)**(0.003)** Wealth4-0.009-0.018-0.017-0.014 (0.006)(0.004)***(0.003)***(0.004)*** Wealth5-0.019 -0.017 (0.006)*** (0.005)*** Public-0.005-0.006-0.029-0.004 (0.016)(0.020)(0.010)***(0.010) Wealth2*Public-0.023-0.015-0.005-0.013 (0.015)(0.013)(0.012)(0.010) Wealth3*Public-0.014-0.011-0.008-0.024 (0.014)(0.018)(0.012)(0.007)*** Wealth4*Public-0.018-0.0000.007-0.026 (0.013)(0.024)(0.018)(0.005)*** Wealth5*Public-0.022-0.013-0.002-0.012 (0.013)*(0.018) (0.009) (other covariates omitted) Observations39,85720,14444,51923,508 Pseudo-R20.03570.03980.04550.0627 Robust standard errors adjusted for clustering on Unidade de Federacão in parentheses * significant at 10%; ** significant at 5%; *** significant at 1% Paola Salardi, The Estimation of the Health Functioning Production Function for Brazil, Oxford 2009 Conference “New Directions in Welfare”, 29 June – 1 July

15. Empirical findings (IV) TABLE VIII. Ordered probit estimates using SHSI by gender and race (1)White women(2)White men(3)Non-white women (4)Non-white men Private and public resources Wealth20.0450.1030.0670.105 (0.033)(0.032)***(0.021)***(0.032)*** Wealth30.1340.2370.1560.205 (0.043)***(0.047)***(0.030)***(0.036)*** Wealth40.2770.3190.2550.289 (0.044)***(0.033)***(0.029)***(0.035)*** Wealth50.5460.5360.4440.451 (0.041)***(0.039)***(0.033)***(0.044)*** Public0.1720.1100.2790.369 (0.024)***(0.045)**(0.035)***(0.026)*** (other covariates omitted) /Cut1-2.279-2.386-2.262-2.356 0.1210.1200.1050.102 /Cut2-0.984-1.216-0.944-1.173 0.1210.1130.1120.106 Observations39,85720,14444,51923,508 Pseudo-R20.10750.11130.07920.0884 Robust standard errors adjusted for clustering on Unidade de Federacão in parentheses * significant at 10%; ** significant at 5%; *** significant at 1% Paola Salardi, The Estimation of the Health Functioning Production Function for Brazil, Oxford 2009 Conference “New Directions in Welfare”, 29 June – 1 July

16. Empirical findings (V) Considering the entire population: By identifying the health functioning with SRMI, public resources are more crucial than private wealth, while the reverse is true for SHSI. Private and public resources are complementary in the conversion process. By looking at the population groups by gender and race: The rate of conversion for private resources for white men is on average higher than other groups; The rate of conversion for public resources for white individuals is on average smaller than for non-whites; Women show on average a greater ability to convert public resources than men. Paola Salardi, The Estimation of the Health Functioning Production Function for Brazil, Oxford 2009 Conference “New Directions in Welfare”, 29 June – 1 July

17. Policy implications By revealing the differences in conversion rates across groups this paper highlights the importance of targeted policies instead of universal policies. 1.why is it that certain groups have higher conversion rates for particular resources, and how can the conversion rates of other groups be improved? 2.recognizing that different groups benefit differentially from different resources, which resources should be the focus of government attention? The Brazilian policy maker should be interested in understanding why non-white individuals have the highest conversion rates in using public resources. Recognizing the heavy reliance of women on public services, the public health services might wish to create more female-centric policies to most efficiently improve health functioning. Paola Salardi, The Estimation of the Health Functioning Production Function for Brazil, Oxford 2009 Conference “New Directions in Welfare”, 29 June – 1 July

18. Further steps Need of more statistical data in order to better define functionings Further investigation on the type of resources considered in the model Introduction of additional conversion factors: problem with the omitted variables Improvement of the econometric strategies: whether IV estimation procedure is able to control for the endogeneity problem and whether or not there are valid instruments Paola Salardi, The Estimation of the Health Functioning Production Function for Brazil, Oxford 2009 Conference “New Directions in Welfare”, 29 June – 1 July