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Income Inequality and Health: New Evidence from Panel Data

  • Dierk Herzer
  • Peter Nunnenkamp

This paper argues that previous cross-country (panel) studies on the relationship between income inequality and health suffer from significant biases due to (i) omitted country-specific factors, (ii) endogeneity, and (iii) cross-country heterogeneity in the impact of inequality on health. Using panel cointegration techniques that are robust to omitted variables, endogenous regressors, and slope heterogeneity, we find that income inequality has, on average, a small, but robust and statistically significant positive impact on population health. Also, there is some evidence that inequality is endogenous in the sense that poor health leads to increased income inequality. Finally, we find that there are large cross-country differences in the effect of income inequality on health (in about 35 percent of the cases, the effect is negative

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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1736.

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Length: 34 pages
Date of creation: Oct 2011
Date of revision:
Handle: RePEc:kie:kieliw:1736
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  10. Peter Pedroni, 2004. "Panel Cointegration: Asymptotic and Finite Sample Properties of Pooled Time Series Tests with an Application to the PPP Hypothesis," Department of Economics Working Papers 2004-15, Department of Economics, Williams College.
  11. Meschi, Elena & Vivarelli, Marco, 2009. "Trade and Income Inequality in Developing Countries," World Development, Elsevier, vol. 37(2), pages 287-302, February.
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  27. Entorf, Horst, 1997. "Random walks with drifts: Nonsense regression and spurious fixed-effect estimation," Journal of Econometrics, Elsevier, vol. 80(2), pages 287-296, October.
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