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The relative income hypothesis: does it exist over time? Evidence from the BHPS

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  • Lindley

    (University of Sheffiled)

  • Lorgelly

    (University of East Anglia)

Abstract

The relative income hypothesis suggests that income inequality has a detrimental affect on people’s health. This previously well accepted relationship has recently come under scrutiny. Some claim it is a statistical artefact, while others argue that aggregate level data are not sophisticated enough to adequately test for its existence. This paper adds to the debate by estimating the relationship between income inequality and health using panel data. A random effects ordered probit is used to estimate the relationship between net household income, regional income inequality and self-reported health, for 3736 individuals over 9 years, while controlling for individual socioeconomic characteristics like gender, social class and age. Significant differences in income inequality across regions and considerable changes in health are found across years, however, the panel data estimating regressions find no significant association between any of the measures of income inequality and self-reported health. Therefore, it would appear that the relative income hypothesis does not exist over time and does not exist within Britain.

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Bibliographic Info

Paper provided by EconWPA in its series Labor and Demography with number 0510007.

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Date of creation: 07 Oct 2005
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Handle: RePEc:wpa:wuwpla:0510007

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Web page: http://128.118.178.162

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  10. Butler, J S & Moffitt, Robert, 1982. "A Computationally Efficient Quadrature Procedure for the One-Factor Multinomial Probit Model," Econometrica, Econometric Society, vol. 50(3), pages 761-64, May.
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  12. Dean R. Lillard & Richard V. Burkhauser, 2005. "Income Inequality and Health: A Cross-Country Analysis," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 125(1), pages 109-118.
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  16. Jennifer M. Mellor & Jeffrey Milyo, 1999. "Re-Examining the Evidence of an Ecological Association between Income Inequality and Health," Discussion Papers Series, Department of Economics, Tufts University 9922, Department of Economics, Tufts University.
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Cited by:
  1. Andrew M. Jones & Stefanie Schurer, 2011. "How does heterogeneity shape the socioeconomic gradient in health satisfaction?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 26(4), pages 549-579, 06.
  2. Cristina Hernandez-Quevedo & Andrew M Jones & Nigel Rice, . "Reporting Bias and Heterogeneity in Self-Assessed Health. Evidence from the British Household Panel Survey," Discussion Papers 04/18, Department of Economics, University of York.

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