Concept Architecture
Concept
Theoretically, the Suits Index is a measure of tax progressivity that quantifies how the burden of a tax is distributed across the income distribution. It is analogous to the Gini coefficient but applies to the cumulative distribution of tax payments rather than income. In health economics, the Suits Index is used to evaluate the progressivity or regressivity of healthcare financing mechanisms, including taxes, insurance contributions and user charges.
Mathematically, the Suits Index is derived from the area between the concentration curve of cumulative tax payments and the line of proportionality. It ranges from ?1 to +1. Positive values indicate progressive financing, where higher-income individuals contribute a larger proportion of income. Negative values indicate regressive financing, while a value of zero represents proportional financing.
In practice, the Suits Index is estimated using ranked household income data together with observed healthcare financing contributions or taxes. Concentration curves are constructed from cumulative income and cumulative payments, and numerical integration is used to estimate the area required for the index. The measure is widely applied in comparative studies of health financing equity and fiscal incidence analyses.
Purpose
Used to measure the progressivity or regressivity of healthcare financing and taxation systems by quantifying how financial contributions are distributed across the income distribution.
Mathematical Formulae
Primary Formula
S = 1 ? 2??? L?(p) dp
where:
- S = Suits Index
- L?(p) = cumulative proportion of tax or healthcare financing contributions paid by the lowest p proportion of the population ranked by income
For grouped data, the index is commonly estimated numerically as:
S = 1 ? ????� (T? + T???)(P? ? P???)
where:
- P? = cumulative population proportion
- T? = cumulative proportion of tax or healthcare financing contributions
Supporting Formulae
There is no universally recognised canonical mathematical formula.
Related Mathematical Methods
- Lorenz Curve
- Concentration Curve
- Gini Coefficient
- Kakwani Index
- Reynolds?Smolensky Index
- Fiscal Incidence Analysis
Example
A health economist evaluates a healthcare financing reform using household survey data. The estimated Suits Index for the previous financing system is ?0.12, indicating regressive financing. Following reform, the index increases to 0.09, demonstrating that financing has become progressive, with higher-income households contributing proportionally more towards healthcare expenditure.
Excel Implementation
| Function | Example Formula | Health Economics Application |
|---|---|---|
| SUMPRODUCT | =1-SUMPRODUCT((C3:C12+C2:C11),(B3:B12-B2:B11)) | Calculates the Suits Index from cumulative population and cumulative contribution shares. |
| SORT | =SORT(A2:C101,1,1) | Orders households by income before constructing cumulative distributions. |
| SUM | =SUM(C2:C101) | Calculates total healthcare financing contributions prior to cumulative analysis. |
VBA (Optional)
A VBA macro can automate construction of cumulative contribution curves, calculate Suits Indices for multiple financing schemes and produce comparative equity reports.
Sources
- Suits, D. B. (1977). Measurement of Tax Progressivity. American Economic Review, 67(4), 747?752.
- O'Donnell O, van Doorslaer E, Wagstaff A, Lindelow M. Analyzing Health Equity Using Household Survey Data. World Bank.
- Wagstaff A, van Doorslaer E. Equity in the finance of health care: some further international comparisons.
- Drummond MF, et al. Methods for the Economic Evaluation of Health Care Programmes. Oxford University Press.
- Lambert PJ. The Distribution and Redistribution of Income. Manchester University Press.
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 Suits index?
A measure of the progressivity of a tax or financing system, using a concentration curve plotting cumulative tax burden against cumulative income.
Source: Suits 1977
Who developed the Suits index?
The measure was introduced by Daniel Suits in the late 1970s as a way to summarise how the burden of a tax is distributed across income. He plotted the cumulative share of tax paid against the cumulative share of income received and compared the resulting curve with the line of proportional payment. The area between them, scaled to run between fixed bounds, gives a single figure for progressivity. Suits (1977) set out the construction.
Source: Suits 1977
How is the Suits index calculated?
It is calculated from a curve plotting the cumulative percentage of taxes paid against the cumulative percentage of income, as income rises. The index compares the area under this curve with the area under the line of proportionality, where each income group pays a share of tax equal to its share of income. A curve below the proportional line, giving a positive index, indicates progressivity; one above it, giving a negative index, indicates regressivity.
Source: Suits 1977
How is the Suits index interpreted?
A positive Suits index indicates a progressive system, in which higher-income groups bear a larger share of the tax burden relative to their income; a negative value indicates a regressive system, in which lower-income groups bear a proportionately larger share; and a value near zero indicates proportionality. The magnitude reflects the degree of progressivity or regressivity, allowing taxes or financing systems to be ranked by how their burden falls across the income distribution.
Source: Suits 1977
How does the Suits index compare with the Kakwani index?
Both measure the progressivity of a tax or financing system and yield similar conclusions, but they are constructed differently: the Suits index plots the tax burden against cumulative income, while the Kakwani index takes the difference between the concentration index of payments and the Gini of income. The two are closely related and usually agree on whether a system is progressive or regressive, though they can differ in exact value because they weight the distribution somewhat differently.
Source: Suits 1977
How is the Suits index used in health financing?
In health financing it is used to assess and compare the progressivity of the sources that fund health care, such as taxes, insurance contributions, and out-of-pocket payments, showing how the burden of each falls across income. A source with a positive index draws proportionately more from the better off, while out-of-pocket payments typically yield a negative index. It thus informs judgements about the fairness of how a health system raises its funds.
Source: Suits 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/suits-index
- Term code
- HE-EE-HE-015
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