Income Distribution and Health: A Worldwide Analysis

Despite having had nearly a decade of economic growth, the United States is among many developed countries that lag behind under developed countries on various health indicators such as life expectancy. Although access to universal health care is also a major contributor to the level of health of a nation, growing evidence suggests that broader economic forces may be playing a larger role in determining a nation’s health status. In a book written by British economist Richard G. Wilkinson, it is argued that the widening gap between the rich and the poor affects the health gains in advanced nations. Wilkinson states that levels of income inequality affect health more so than absolute living standards. His research indicates that life expectancy in certain nations is unrelated to average income but tends to be higher in countries with less inequality. He also showed that longevity has risen faster in those nations with narrowing income gaps than in those with widening gaps (Koretz, 1997). A few of the first individuals to work on this subject, Kennedy and Kawachi (1999), stated that the extent of income inequality in a society determines its average health status. Their relative income hypothesis states that the greater the level of income inequality present in a society, the lower the average health of that particular society. The main goal of this paper will be to test the relative income hypothesis by applying it to other developed and less developed countries. This paper will take a section by section approach to evaluate the relationship between income inequality and health. Section II evaluates the existing literature about income inequality and health. Section III introduces the theoretical foundation for this topic. Section IV lays out the hypothesis and explains the empirical model and data. Section V discusses the results of the model, and section VI draws conclusions from the results and suggests policy implications.