Academic journal article Journal of Economic Cooperation & Development

Revisiting Health and Income Inequality Relationship: Evidence from Developing Countries

Academic journal article Journal of Economic Cooperation & Development

Revisiting Health and Income Inequality Relationship: Evidence from Developing Countries

Article excerpt

In general, countries with more equal distribution of income enjoy better health. Earlier empirical studies on the relationship between income distribution and health at country level present strong evidence that income inequality on an average impedes the improvement of population health. However, a majority of these empirical studies are based on data from either only developed countries or pooled data from developing and developed countries. They mainly study the relationship at a single point of time or at an average of several years. These studies also fail to take into account the country specific unobserved heterogeneity. Departing from the general trend of the current literature, this paper examines the health-income inequality hypothesis using panel data from 31 low income and low middle income countries for the period of 1982-2002. Application of fixed effects and random effects model to control for country specific heterogeneity in this study provides contradictory findings to the existing cross country studies. In other words, empirical results of this paper confirm that there is a positive relation between health and income distribution in this set of developing countries over the study period.

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1. Introduction

In last couple of decades, there has been a rising trend in life expectancy and a declining trend in infant mortality and under-five mortality rates in the world. This large improvement in health outcome of population is more pronounced in developing countries as compared to developed ones. Meanwhile, income inequality has also increased in many countries. It is a common belief that countries with more unequal distribution of income usually lag behind in terms of many indicators of human development including health. In this context, more than 200 articles have already been published to understand the relationship between income distribution and health. The nexus between population health and income inequality was first brought about by Preston in his famous seminal paper in this fashion "...the distribution of income is clearly a likely source of variance in the basic relation between national life expectancy and average national income" (Preston 1975, p. 242). Though Preston did not directly claim that income inequality is detrimental to average health of population, a large body of empirical literatures in this field provides overwhelming evidence in this direction. For example, Wilkinson and Pickett (2006) have reviewed 155 peer published reports on the relationship between different measures of income distribution and health and found that 131 studies either completely or partially support the proposition that income inequality, in general is harmful to health.1 Previous empirical works motivated Wilkinson (1996) to conclude that the distribution of income is "one of the most powerful influences on the health of whole populations in the developed world to have come to light" (as cited in Herzer and Nunnenkam, 2011, p. 1). Several other authors including Rodgers (1979) and Waldmann (1992) are also in favor of this view. However, Judge et al. (1998) states that aggregate cross country studies often suffer from inadequate samples, employing too simple bi-variate specifications without appropriate controls, consider only single point of time and lack high quality data for income inequality. Several recent works (Mellor and Milyo, 2001; Leigh and Jencks, 2007) have tried to overcome these limitations and have explored that the strong negative association between health and income inequality could be reversed. However, majority of these empirical studies are based on data from either only developed countries or pooled data from developing and developed countries. To the best of my knowledge, there is no single study, which solely makes use of cross sectional data for several time periods to assess how income inequality affects health of population in the developing countries. …

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