Income-related health inequalities: some microeconometric evidence using the SHARE survey

Income-related health inequalities have gained much attention. Recent studies have identifed an association between income, income inequalities and health where it is said that income inequalities are detrimental to individual health. Two hypotheses have been drawn concerning the link between health, income and income inequalities. The Absolute Income Hypothesis states that income has a positive and concave effect on health and the Income Inequality Hypothesis states that income inequalities are a threat to the health of individuals within a society. We set up ordered probit regres- sions in order to examine the determinants of the health status. We use data from the fifth wave of the Survey of Health, Ageing and Retirement in Europe (SHARE) which is a panel database of micro data on health and socio-economic status, to test the above hypotheses. Our results concerning the Absolute Income Hypothesis and the Income Inequality Hypothesis (both the strong version which states that inequality affects all members in a society equivalently, irrespective of their levels of income, and the weak version which assumes that income inequalities may hurt the health of only the least well off in a society) are consistent with the literature. We also investigate the mechanisms of the strong version of Income Inequality Hypothesis (disinvestment in human capital, the erosion of social capital, and stressful social comparisons) and we find consistent results. Moreover, as our variable of interest is subjective there can be issues of interpersonal comparisons since the interpretation of the different modal- ities can differ. As a result, we implement a generalized ordered probit which proves that the results do not change significantly. Finally, we use a delayed measurement of income inequalities and the results are consistent with the existence of a causal link between income, income inequalities and health.