Concave relationship between income health

concave relationship between income health

studying the relationship between income, income inequalities and health is lationship between health and income is positive and concave. First, studying the shape of the health-income relationship would allow to better If the relationship between income and health is concave, any increase in. Figure 1 The Concave Relationship Between Income and Life Expectancy of income (and not anyone else's income). The relationship of individual income to .

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.

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.

Some microeconometric evidence on the relationship between health and income

However, the authors previously mentioned focus mainly on one of the versions in the best case mainly on data from the United Stateswithout comparing them. This paper aims at filling these gaps by looking at the three hypotheses, using the same European data, in order to give more insight about efficient public policies which should be implemented in Europe.

Finally, studying these three hypotheses at the same time allows to highlight different mechanisms between health and income. In this paper, we test the three above hypotheses with the Survey of Health, Ageing, and Retirement in Europe SHAREusing mainly the fifth wave of this survey releaseas well as the pooled version of the survey in robustness.

We use self-perceived health status as our health outcome. This type of subjective measure is sometimes criticized but it is similar to the ones used by Mackenbach et al. Furthermore, some authors show that these subjective measures are not biased [ 1 ]. The paper is organized as follows.

concave relationship between income health

This section formally presents the three hypotheses mentioned in the introduction, as well as some related literature. We should mention that, in this literature review, we transcribe terminology employed by authors which reflects causal relationships even if cross-sectional databases are used or some endogeneity might be at play.

concave relationship between income health

With a more linear relationship the losses and gains would tend to balance each other. Thus the shape of the relationship plays a critical role in the debate. Unfortunately, few studies have addressed it directly.

Preston curve

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.

concave relationship between income health

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. This leads the authors to suggest that the shape of the relationship may depend on the level of income inequality: This line of reasoning, elaborated by Ellison, 8 turns Gravelle's formulation on its head.

Implicit in this explanation is the notion of the curvilinear relationship as somehow the natural state which will tend to arise unless preventive measures are taken. Why, we might ask, does the curvilinear relationship seem so appealing?

Preston curve - Wikipedia

There are several possible reasons. One is simply a carry over from the clear non-linearity that appears, for example between GDP and life expectancy, when a full range of countries is included.

In an interesting variation on this theme, Ellison 8 speculates that the effect of high income inequality is to reduce the poorest individuals' income to the part of the relationship where the relationship becomes non-linear again.