Relative Income, Race, and Mortality

The topic of this paper is the relationship between relative income and health. We examine whether people whose incomes are high relative to others who live in the same geographic area have lower or higher mortality. This analysis holds own income fixed, so the question is not only whether own income matters for health, but also whether the incomes of others affects health given own income. It is well-established that wealthier individuals are healthier and live longer (see Sorlie et.al. (1995) and Elo and Preston (1996), and the review in Adler et.al. (1994)). The proposition that relative income affects health is more controversial. Although there are reasons why there could be health benefits from having wealthier neighbors, a growing body of literature argues that low relative income is a health hazard. This proposition runs counter to the Pareto principle and, if correct, could have very unorthodox implications for economic policy.