Analyzing the health implications of rising income inequality: What does the data say?

Abstract

Does income inequality worsen a country's health outcomes? In this study, we examine the effect of income inequality and redistribution on health outcomes using a panel dataset for a global sample of 154 countries from 1990 to 2020, and the instrumental variable method. The evidence from the empirical analyses revealed that, on average, higher income inequality is associated with poor health outcomes. On the other hand, this study documented that, on average, countries with higher income redistribution have better health outcomes. From regional analyses, we documented that income inequality strongly worsens health outcomes in South Asia, the Middle East and North Africa, sub-Saharan Africa and the Caribbean and Latin America. We found that education, environmental pollution, health expenditure and GDP per capita are the potential channels through which income inequality affects health outcomes. The findings established in this study suggest that a political environment that supports better income distribution would lead to better health outcomes.