Inequalities in Income and Inequalities in Health

Angus Deaton

NBER Working Paper No. 7141
Issued in May 1999
NBER Program(s):Economics of Aging, Health Care

What is inequality in health? Are economists' standard tools for measuring income inequality relevant or useful for measuring it? Does income protect health and does income inequality endanger it? I discuss two different concepts of health inequality and relate each of them to the literature on the inequality in income. I propose a model in which each individual's health is related to his or her status within a reference group as measured by income relative to the group mean. Income inequality, whether within groups or between them, has no effect on average health. Even so, the slope of the relationship between health and income, the gradient,' depends on the ratio of between- to within-group inequality. The model is extended to allow income inequality to play a direct role in determining health status. Empirical evidence on cross-country income inequality and life-expectancy within the OECD, and on time series for the U.S., Britain, and Japan, provides little support for the idea that inequality is a health hazard at the national level. Birth cohorts in the US between 1981 and 1993 show no relationship between mortality and income inequality. However, there is a well-defined health gradient in these data, and its slope increases with cohort income inequality.

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Document Object Identifier (DOI): 10.3386/w7141

Published: Welch, Finis (ed.) The causes and consequences of increasing inequality. Chicago: Chicago University Press, 2001.

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