Kakwani Index

A measure of theprogressivity/regressivity of health care payment systems. It is the difference between a concentration index for payments and the Gini coefficient for prepayment incomes, equivalent to twice the area between the payments concentration curve and the Lorenz curve. A positive value indicates progressivity, a negative value regressivity and zero indicates proportionality. See Nanek C. Kakwani (1977), 'Measurement of tax progressivity: an international comparison', Economic Journal, 87, 71-80.

Kaldor-Hicks Criterion

This is a criterion (compensation test) for judging whether a proposed change (say, the introduction of a new drug or the demolition of an old hospital) is welfare-enhancing. It is named after Nicholas (Lord) Kaldor (1908-1986) and Sir John Hicks (1904-89). The Kaldor criterion says that, if the minimum the gainers from the change are willing to pay is more than enough to compensate the losers fully, then the project is welfare-enhancing. The Hicks criterion says that, if the maximum amount the losers are prepared to offer to the gainers in order to prevent the change is less than the minimum amount the gainers are prepared to accept as a bribe to forgo the change, then the project is welfare-enhancing. The Kaldor compensation test takes the gainers' point of view; the Hicks compensation test is made from the losers' point of view. If both conditions are satisfied, both gainers and losers will agree that the proposed activity will move the economy toward Pareto optimality. There is the possibility that the Kaldor-Hicks criterion might sanction a move from state A to state B and then from B to A (ad infinitum and, probably, nauseam). This has led to the explicit ruling out of the reversal possibility, known as the Scitovsky Criterion, which also needs to be satisfied if a change is to be judged to be welfare-enhancing. Note that the compensation does not actually have to be paid. Note also that there is an implicit assumption that everyone has the same marginal utility of income. For true Pareto-optimality, compensation must actually be paid. See John H. Hicks (1939), 'The foundations of welfare economics', Economic Journal, 49, 696-712; Nicholas Kaldor (1939), 'Welfare propositions in economics', Economic Journal, 49, 549-52; Tibor Scitovsky (1941), 'A note on welfare propositions in economics', Re-

190 Kaplan-Meier Method view of Economic Studies, 9, 77-88. See Compensating Variation, Equivalent Variation, Interpersonal Comparisons of Utility.

Kaplan-Meier Method

The Kaplan-Meier method is a method of estimating the proportion of patients still surviving by any given date. See E.L. Kaplan and Paul Meier (1958), 'Nonparametric estimation from incomplete observations', Journal of the American Statistical Association, 53, 457-81. See Survival Curve.

Keeler-Cretin Paradox

This is the argument in cost-utility analysis that, if health benefits are discounted at a lower rate than costs, the cost-effectiveness ratio can be improved by delaying the introduction of the technology in question and continue to be improved by further delays ad infinitum. See Emmett B. Keeler and Shan Cretin (1983), 'Discounting of life-saving and other non-monetary effects', Management Science, 29, 300-306.

Kendall's Coefficient of Concordance

A measure of the degree of agreement (concordance) between different rank orderings of the same set of entities. Cf. Spearman's Rank-order Correlation Coefficient.


The physiological study of muscles and the movement of the human body. Kurtosis

A measure of the peakedness or flatness of a frequency distribution compared with a normal distribution. Cf. measures of skewness.

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