Concave relationship between income health

concave relationship between income health

The Preston curve is an empirical cross-sectional relationship between life expectancy and real The fact that the relationship between income and health is concave indicates that a transfer of income from the rich to the poor would increase. would account for exactly 10 percent of the aggregate income and the Lorenz curve The concave relationship between income and health has important. If the relationship between individual income and individual health outcomes sectional studies support the existence of a concave relationship between.

With these elements in mind, this paper confronts on an empirical basis three hypotheses.

concave relationship between income health

The first one, called the Absolute Income Hypothesis, was initially introduced by Preston [ 29 ] and states that there is a positive and concave relationship between income and health. The second one is the strong version of the Income Inequality Hypothesis and it asserts that the health status is determined by income inequalities within a society.

Some microeconometric evidence on the relationship between health and income

Thus, the health of all individuals is affected by an increase or a decrease in income inequalities. The last one, a weak version of the Income Inequality Hypothesis, says that income inequalities are a threat to individuals placed at the lower end of the income distribution. This last hypothesis implies that income inequalities do not impact low income people and high income people in the same magnitude.

Various authors have studied the Absolute Income Hypothesis mainly in the United States, using different health measures, like self-perceived measures [ 26 ], life expectancy [ 10 ] and other health outcomes [ 812 ]. Fiscella and Franks [ 13 ], Kennedy et al.

Concerning the weak version of the Income Inequality Hypothesis, there are few empirical studies which investigate it, with the exception of Mellor and Milyo [ 27 ] in the United States, Li and Zhu [ 21 ] in China or Hildebrand and Van Kerm [ 15 ] in Europe.

Importantly, the strong version of Income Inequality Hypothesis and the weak version of Income Inequality Hypothesis are non-nested given that the weak version considers the rank of individuals and an interaction term between the rank and the income inequalities index whereas the strong version does not.

Preston curve - Wikipedia

Thus, both versions can be valid when income inequalities in a society are negatively associated to the health of all individuals, and more particularly the health of people ranked at the lower end of the income distribution. So the average health of the more unequal society will be lower. With a more linear relationship the losses and gains would tend to balance each other.

Intermediate Microeconomics: Convex and Concave functions

Thus the shape of the relationship plays a critical role in the debate. Unfortunately, few studies have addressed it directly.

Some microeconometric evidence on the relationship between health and income

Whilst Wilkinson, himself, is agnostic about the shape of the relationship, 3 others are less so. In terms of mortality, the study by Martikainen et al. For health more generally, we have suggested that there is no single relationship between health and income. In a study of 14 health measures, 7 we found that the relationship to income varied according to the aspect of health considered as well as by age and sex.

Now having clear evidence that the relationship of income with mortality varies between countries, we might speculate that associations with health also vary between countries.

concave relationship between income health

If this is the case, we should be wary of relying too heavily on the evidence from a single country. A large proportion of the literature is based on data from the USA, but this may not be generalizable to other countries. Relative to other developed countries, the USA has high levels of income inequality whereas Finland has low levels.

concave relationship between income health

Some research however suggests that a similar relationship does not hold in time series and longitudinal data within individual countries. This suggests that over time changes in income may have no impact on health or even be negatively related. It could actually be that better health, as proxied by life expectancy, contributes to higher incomes, rather than vice versa.

concave relationship between income health

Diseases such as malaria can short circuit these processes. As such, studies which do not account for this potential two-way causation may overestimate the importance of income for life expectancy.

concave relationship between income health

In economic research, this kind of problem has traditionally been dealt with through the use of instrumental variables which allow the researcher to separate out one effect from another. However, since any variable which is likely to correlate with income is also likely to correlate strongly with health and life expectancy this is a difficult task.