Concept Architecture
Concept
Theoretically, the Kakwani Index is a measure of the progressivity or regressivity of healthcare financing that compares the distribution of healthcare payments with the distribution of income. It is founded on public finance theory and welfare economics and exists to determine whether financial contributions to healthcare are borne proportionately according to individuals' ability to pay. A positive index indicates progressive financing, whereas a negative index indicates regressive financing.
Mathematically, the Kakwani Index is defined as the difference between the concentration index of healthcare payments and the Gini coefficient of pre-payment income. The index ranges theoretically from ?2 to 1, although empirical values are typically much closer to zero. Positive values indicate that higher-income individuals contribute a proportionately larger share of healthcare payments than lower-income individuals.
In practice, the Kakwani Index is estimated using household survey data containing information on income and healthcare payments such as taxes, insurance premiums or out-of-pocket expenditure. It is widely applied in health economics to assess the equity of healthcare financing systems and compare financing arrangements across countries or over time.
Purpose
Used to measure the progressivity of healthcare financing, evaluate equity in financial contributions, compare alternative financing mechanisms and support health financing policy analysis.
Mathematical Formulae
Primary Formula
K = C ? G
where:
- K = Kakwani Index
- C = Concentration Index of healthcare payments
- G = Gini Coefficient of pre-payment income
Supporting Formulae
Concentration Index:
C = (2 / ?) Cov(y, r)
Gini Coefficient:
G = (????� ????� |x? ? x?|) / (2n�?)
Related Mathematical Methods
- Concentration Index
- Gini Coefficient
- Lorenz Curve Analysis
- Concentration Curve Analysis
- Progressivity Analysis
Example
A national health financing study estimates:
- Gini Coefficient for household income = 0.34
- Concentration Index for healthcare payments = 0.48
The Kakwani Index is:
K = 0.48 ? 0.34 = 0.14
A value of 0.14 indicates that healthcare financing is progressive, with higher-income households contributing proportionately more than lower-income households.
Excel Implementation
| Function | Example Formula | Health Economics Application |
|---|---|---|
| Subtraction | =B2-C2 | Calculates the Kakwani Index from the concentration index and Gini coefficient. |
| COVARIANCE.P | =COVARIANCE.P(B2:B101,C2:C101) | Calculates covariance required for the concentration index. |
| AVERAGE | =AVERAGE(B2:B101) | Calculates the mean payment or income. |
| RANK.AVG | =RANK.AVG(C2,$C$2:$C$101,1) | Produces fractional income rankings for equity analysis. |
VBA (Optional)
Automate estimation of concentration indices, Gini coefficients and Kakwani Indices for multiple healthcare financing scenarios.
Sources
- Kakwani NC. Measurement of Tax Progressivity: An International Comparison. Economic Journal. 1977.
- Kakwani N, Wagstaff A, van Doorslaer E. Socioeconomic Inequalities in Health: Measurement, Computation and Statistical Inference. Journal of Econometrics. 1997.
- O'Donnell O, van Doorslaer E, Wagstaff A, Lindelow M. Analyzing Health Equity Using Household Survey Data.
- Wagstaff A, van Doorslaer E. Equity in Health Care Finance and Delivery.
- World Health Organization. Handbook on Health Inequality Monitoring.
Related Concepts (2)
Library
Publications
1
Fair Society, Healthy Lives: The Marmot Review (Strategic Review of Health Inequalities in England Post-2010) — Michael Marmot, Peter Goldblatt, Jessica Allen, et al., 2010 Edition ed., 2010 (The Marmot Review / UCL Institute of Health Equity)
The landmark strategic review of health inequalities in England, articulating the social determinants of health and the "social gradient" and setting out six policy objectives for reducing inequalities — the defining reference for health-inequalities policy in the UK.
Frequently Asked Questions (6)
What is the Kakwani index?
A measure of the progressivity of a tax or financing system, calculated as the concentration index of payments minus the Gini coefficient of pre-tax income.
Source: Kakwani 1977
Who developed the Kakwani index?
The index is named after Nanak Kakwani, who in the late 1970s proposed measuring the progressivity of a tax by how far the distribution of payments departs from the distribution of income. His idea was to compare a concentration curve for payments against the Lorenz curve for income, capturing in a single number whether those with more income pay a more than proportionate share. The construction separated progressivity from the sheer size of a tax. Kakwani (1977) set out the measure.
Source: Kakwani 1977
How is the Kakwani index calculated?
It is calculated as the difference between the concentration index of payments, which measures how payments are distributed across the population ranked by income, and the Gini coefficient of income, which measures income inequality. Where payments are distributed more unequally, with the rich paying more, than income itself is distributed, the index is positive, indicating progressivity; where payments are distributed less unequally than income, it is negative, indicating regressivity.
Source: Kakwani 1977
How is the Kakwani index interpreted?
A positive Kakwani index indicates a progressive financing system, in which payments take a rising share of income as income rises, so the better off contribute proportionately more; a negative value indicates a regressive system, in which the poorer contribute proportionately more; and a value near zero indicates a proportional system. The size of the index reflects the degree of progressivity or regressivity, allowing financing systems to be compared on how their burden falls across income.
Source: Kakwani 1977
How is the Kakwani index used in health financing?
In health financing it is used to assess how the burden of paying for health care, through taxes, insurance contributions, or out-of-pocket payments, is distributed across income, and to compare the progressivity of different financing sources or systems. A source with a positive index draws proportionately more from the better off, while out-of-pocket payments often yield a negative index, falling harder on the poor. It thus informs judgements about the fairness of how health care is financed.
Source: Kakwani 1977
What are the limitations of the Kakwani index?
The Kakwani index measures progressivity relative to the existing distribution of income, so it captures how payments depart from proportionality but not the overall redistributive effect, which also depends on how much revenue is raised. It summarises the whole distribution in one figure that can obscure where in the income range progressivity lies. It also treats only the payment side, not how the benefits of spending are distributed, so a full equity judgement requires considering both.
Source: Kakwani 1977
Trust Record
Verified by Dr Darrin Baines
British health economist
Professional identity: darrinbaines.org
Verification date: 27 Aug 2025
Content version: 1.0.0
Canonical Identity
- Persistent URI
- https://healtheconomics.wiki/concept/kakwani-index
- Term code
- HE-EE-HE-009
Stable URI · Machine-readable · Resolvable · CC BY 4.0