Estimating capability as a latent variable: a latent variable a multiple causes approach - the example of health

Abstract

Following Sen’s approach to poverty, the ‘real’ poor are those who did not have the choice not to be poor. In other words, poor is an individual who did not have the capability (i.e. the possibility, the ability) to have a suitable income to survive on, a good level of health, a suitable habitat, a good level of education and so on and so forth. The capability approach was introduced for developing countries, thus it has to be readapted for the industrialized ones. In these countries it is necessary to assess the ‘real’ poverty in Sen’s way of thinking. This is important for the implications of political economy that it involves. Among the several dimensions of poverty, we concentrate on the analysis of health because the capability of health is one of the most important constituent of our well-being. We can proceed with an econometric analysis to assess the link between the capability of being healthy and a set of exogenous variables, using the innovative statistics technique of MIMIC (Multiple Indicators and Multiple Choice) model for latent variables. We used the Italian dataset (wave 7, 2001) of the European Community Household Panel. The main results show that deprivation, in each dimensions considered, influences negatively the capability of health, even if healthy pepole are the most in the sample, the percentage of them decrease when we consider the state of deprivation. Mimic model confirms this explorative analysis, showing a correlation between all the exogenous variables considered and the capability of health.