2014 Articles

Do people in equal societies live longer? The relative income hypothesis in light of panel data

Balgova, Maria

This paper reexamines the hypothesis of a negative causal relationship between income
inequality and life expectancy. The relative income hypothesis has attracted the attention of
policymakers and may become a powerful argument in favor of government redistribution
of wealth. To test this claim, this paper draws on panel data from thirty-six countries over
eighteen years and employs a specific variable transformation to enable direct testing of the
relative income hypothesis from aggregate data. The conclusion of this analysis is that a negative
impact of income inequality on life expectancy cannot be empirically substantiated.