Cross-National Income Disparity and Life Expectancy

This study examines cross-national relationship between income inequality and population health. It has long been speculated that income inequality is detrimental to population health due to material and psychosocial deprivation, given the robust relation found between income and individual health. Though test of this thesis initially corroborated a negative relation across counties and countries, whether the relation is causal in nature remains in question. During recent years, the thesis has brought under a more careful scrutiny with the use of more robust methodological tools due the increased availability of longitudinal data and prevalence of corresponding statistical models. Most of the longitudinal studies reported null finding. However, longitudinal studies are also plagued by lack of comparable data and hence many of them can only examine the relation across limited number of countries and/or time period. In this study, a more comprehensive dataset, Standardized World Income Inequality Database (SWIID) with wider range of countries and time period together with improved comparability is analyzed. Given previous findings concerning the thesis, three hypotheses are tested: (a) income inequality has detrimental effect on life expectancy, (b) income inequality has a more detrimental effect on life expectancy if household gross (pre-tax, pre-transfer) but not net income inequality is used, and (c) income inequality’s effect on life expectancy is not stable across different years. With the improvement of data coverage, fixed-effect analyses with Huber-White sandwich estimators are carried out to examine the thesis across about 150 countries and 16 years. Specifically, results only support the last thesis with unexpected positive effect of income inequality on life expectancy during late 90s but not later period. Potential explanations, limitations and future improvements are discussed.