Disentangling the relationship between health and income

Abstract

The nature of the relationship between health and income is still
not clearly defined. It is believed that personal income affects health
but this may not be the end of the story. Income may also play its
part through issues of relativity and deprivation. It may even be possible
that these latter indirect effects are more important determinants
of health than individual income. This paper investigates these issues
by focusing on the relationship between income and health. The
models are estimated using parametric and semiparametric panel data
frameworks in order to ameliorate problems of misspecification and unobservable
heterogeneity. The results demonstrate strong evidence for
income affecting health but limited evidence for relative deprivation.