Does Inequality Cause Poor Health?

Angus Deaton recounts a paper he wrote about this some time ago. Answer: No.

inequality1In 2003, Darren Lubotsky and I published a paper in the journal Social Science and Medicine. Our topic was whether income inequality is a health risk to people who live in particularly unequal cities or states. The idea is that income inequality is like a toxic pollution, harming everyone who lives with it. My own view, then and now, is that there is no such effect, though I also believe that the extreme income inequality that we see in the U.S. today is a threat to public health, but through quite different (essentially political) mechanisms.

Our analysis showed that the correlation between higher mortality and income inequality arises from a failure to control for the racial composition of the population in each city or state. In cities (states) with a larger fraction of blacks, the difference between the average incomes of blacks and whites is larger, perhaps because employers do not regard blacks and whites as fully substitutable in production. This drives a link from fraction black to income inequality. But blacks also have worse health than whites ― in part because of an apartheid healthcare system that treats blacks less well than whites ― so that the fraction black is also linked to overall mortality. Those two links induce a strong positive correlation between income inequality and mortality. That this correlation is spurious is documented by its vanishing when we control for fraction black, by the fact that mortality rates of blacks and whites separately are uncorrelated with income inequality, and by the fact that income inequality and mortality are uncorrelated across space in other settings where race is not a salient factor.

HT: Greg Mankiw.

There is also an interesting discussion of how Deaton’s study was attacked by the UMASS crowd — similar to the more recent attack on Reinhart and Rogoff.

Comments (11)

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  1. JD says:

    The “problem” of inequality is overblown. We live in a world of natural inequality of human equity, “fixing” hampers productive activity, which drags everybody down.

  2. Dewaine says:

    “There is also an interesting discussion of how Deaton’s study was attacked by the UMASS crowd…”

    I wouldn’t put much stock in what the “economists” at UMASS think. It’s the premiere socialist economics department.

  3. Wayne says:

    “…perhaps because employers do not regard blacks and whites as fully substitutable in production.”

    Have there been any studies on this to see what the productivity levels are between races? Would a study like this even be allowed?

  4. Studebaker says:

    “…perhaps because employers do not regard blacks and whites as fully substitutable in production.”

    Economic theory posits that firms engaging in discriminatory practices pay a hefty price. More astute employers would hire the discriminated-against workers and gain a competitive advantage. Maybe that’s what Walmart has done: made a business model of hiring people whose skills other firms have overlooked and using the savings to offer lower prices.

    • George says:

      I’m not sure walmart employment requires much skill

    • Benny Walters says:

      Employers fall guilty to “judging a book by its cover”. Unfortunately, a few bad apples spoiled the bunch.

      I’m a minority citizen who employs low skilled laborers- so don’t jump to any conclusions.

      First off, I really like what NCPA is doing. America needs to be more in-touch with the information that you are releasing. America will not survive many more generations if things keep going in this direction. Free market resolutions are the answer!

      Back to my original point, African American citizens are in need of a serious transformation. We are stereotyped as being lazy. To correct this, much time and effort will need to be devoted increasing our productivity. Walmart is a good first step for employment. But so is entrepreneurship, legal entrepreneurship.

      I started working in a local radiator shop when I was 14 years old. Now at the age of 49, I own it. Hard work pays off.

      • Chris says:

        Hard work definitely pays off, Mr. Walters. Thanks for sharing your story.

        I get tired of the “finger pointing game.” America needs to come together and start remembering the American dream can only be acquired by way of hard work!