We assess the effect of income inequality on life expectancy by performing separate estimations for developed and developing countries. Our empirical analysis challenges the widely held view that inequality matters more for health in richer countries than for health in poorer countries. Employing panel cointegration and conventional panel regressions, we find that income inequality slightly increases life expectancy in developed countries. By contrast, the effect on life expectancy is significantly negative in developing countries. Even though the quantitative effects are small, the contrast between the two country groups proves to be robust to modifications in measurement, specification and methodological choices. Nunnenkamp (2015). Income Inequality and Health: Evidence from Developed and Developing Countries. Economics: The Open-Access, Open-Assessment E-Journal, 9 (2015-4): 1-57. http:// dx.doi.org/10.5018/economics-ejournal.ja. www.economics-ejournal.org 2
JEL I14 C23
IntroductionIncome disparities have widened in various developed and developing countries during the process of economic globalization. Critics have called for redistributive policy interventions, not only for reasons of fairness but also to avoid economic and social costs of wide income gaps. Impaired health could add considerably to such costs. Pickett (2006: 1768) conclude from their comprehensive review of the literature that the large majority of more than 150 empirical studies suggest that "health is less good in societies where income differences are bigger." 1 In particular, this applies to international cross-country studies. Moreover, the literature suggests that the case for health-related redistribution is particularly strong for developed countries. According to Wilkinson (1996: 4), 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." 2 Lynch et al. (1998Lynch et al. ( : 1074 reckoned that the loss of life from income inequality in the United States "is comparable to the combined loss of life from lung cancer, diabetes, motor vehicle crashes, human immunodeficiency virus (HIV) infection, suicide, and homicide in 1995." The so-called Whitehall studies on British civil servants showed "that, even among people who are not poor, there is a social gradient in mortality that runs from the bottom to the top of society" (Marmot 2003: S10). 3 More recently, the meta analysis of Kondo et al. (2009) reveals a modest adverse effect of income inequality on health. 4 Zheng (2012) finds that, while income inequality did not have an instantaneous effect on mortality risk in the United States, long-term _________________________ 1 See also Lynch et al. (2004) who review almost 100 studies addressing the question of whether more unequal societies are less healthy. Informative reviews of the relevant literature are also presented by Judge et al. (1998), Wagstaff and van Doorslaer (2000), Deaton (2003), and Subramanian and Kawachi (2004). 2 I...