The Palestinian Economy. Theoretical and Practical Challenges

Proceedings “The Palestinian Economy: Theoretical and Practical Challenges” 347
the entire population, calling for potential “masking effect”, where the behaviour of some
classes of the population would cover that of others; i.e., resulting in aggregate results
that might not reflect the reality associated with certain sub-groups. In effect, the
decomposition of inequality into its justifiable and unjustifiable parts is interpreted in
terms of average behaviour; i.e., the use-need mean relation as observed over the entire
sample. The inter-personal variations in use are thus assumed to derive solely from
variations in its (non-need) determinants, where the model implicitly presumes, given
(non-need) estimates, the amount of care that ought to be allocated on average for that
need; provided that average behaviour being regarded as if it was a norm (van Doorslaer,
Clarke et al. 2006).
An appealing method of decomposition is the one based on microsimulation
technique (e.g., Harding 1996; Gupta and Kapur 2000; Dormont, Grignonc et al. 2006;
Huber 2006). While it offers a way out to overcome the above shortcomings of the
standard methods, such approach proves to provide several conceptual and practical
advantages over the commonly used ECuity group methods. First, it allows (the
unconditional) use of an appropriate regression model specification of health care
utilisation. Therefore, it avoids the linearity restriction or the “inevitable price… for the
linear approximations” (O’Donnell, van Doorslaer et al. 2007) that is imposed by the
standard decomposition method. In fact, the latter was essentially developed for a singlelinear
additive model (Wagstaff, van Doorslaer et al. 2003), which is not directly
amenable to an analysis of health care utilisation. However, despite being conceptually
unsatisfactory, linear specification based on OLS technique was advocated (van
Doorslaer and Masseria 2004), and implemented (e.g., van Doorslaer, Clarke et al. 2006;
Lu, Leung et al. 2007) for the measurement of inequality in health care utilisation, on the
grounds that these measures are not, particularly, sensitive to linear OLS specifications.
Otherwise, linear approximations to the non-linear models, using the “marginal effects
evaluated at the means”, was proposed (van Doorslaer, Koolman et al. 2004) as a way to
deal with the inherent non-linearity problem in health care utilisation. Though this
solution has the advantage of using appropriate specifications (such as TPM combining a
logit and a truncated negbin) the proposed decomposition, which remains only an
“approximation”, with a bias due to approximation error, was computed separately for
each single equation of the model – i.e., by decomposing separately the CI of
participation, conditional consumption, and the unconditional consumption. By contrast,
the microsimulation technique applied in the present study, while allowing the use of
TPM specifications, the relative importance of each explanatory factors as per