Health Risk, Inequality Indexes, and Environmental Justice

Abstract

Inequality indexes have long been used to analyze distributions of income. Studies have recently begun to use these tools to evaluate the equity of distributions of environmental harm. In response, issues have been raised regarding the appropriateness of using income‐based measures in the context of undesirable outcomes. We begin from first principles, identifying a theoretical preference structure under which income‐based tools can be appropriate for ranking distributions of “bads.” While some critiques of existing applications are valid, they are not a justification for rejecting the approach altogether. Instead, we show how standard income‐based measures can be adjusted to accommodate bad outcomes. Rather than inequality indexes, we argue that equally distributed equivalents (EDEs) are well‐suited for this purpose since they account for levels and dispersion of outcome distributions. The Kolm–Pollak EDE is particularly useful, having the advantage of consistently evaluating both bads and their complementary goods (e.g., mortality risk and survival probability). As an illustration, we show how these tools can inform an environmental justice analysis of a proposed Environmental Protection Agency (EPA) rule addressing indoor air pollution.