Impact of Income Inequality on Health: Does Environment Quality Matter?

This paper examines the link between health indicators, environmental variables, and income inequalities. Theoretically, all the mechanisms described in the literature underline a negative impact of income inequality on health status. However, empirical studies have found different results and there is far from a consensus. In this paper how environment degradation could be considered a channel through which income distribution affects population health is investigated. A simple theoretical model, based on Magnani's, is developed in which relative income affects health status through the level of pollution-abatement expenditures. Econometric analysis suggests that income inequalities negatively affect environmental quality, and that environment degradation worsens population's health. This negative effect of income inequalities on the environment is mitigated by good institutions. It is also suggested that income inequalities negatively affect health status. Another interesting result is that, when environmental variables are taken into account, the level and the statistical significance of the coefficient of the income-inequality variable vanish. This supports the notion that environment quality is an important channel through which income inequalities affect population health. These results hold for air-pollution indicators (CO2 and SO2) and a water-pollution indicator (BOD). The finding is also robust for rich and developing countries. Countries with high income inequalities may implement distributive policies in order to avoid their negative impact on health.