Abstract
This paper addresses key aspects of health inequality. We analyse in particular to what extent income determines household-specific health outcomes in rural Pakistan using our survey data. Controlling for various socio-economic characteristics, we investigate validity of the three income-health hypotheses: the Absolute Income Hypothesis, the Relative Income Hypothesis and the Income Inequality Hypothesis (IIH). Whilst these hypotheses crucially differ in their exact substance, broadly speaking, those refer to the idea that a household’s health status might be linked to the existing socio-economic environment. Households with a more favourable income position (either in absolute, relative or distributional terms) might enjoy a better health status. We employ a general empirical specification that nests different health functions as special cases. This permits testing the income-health hypotheses separately and jointly. We find that in rural Pakistan both the relative income (with respect to the relevant community) and absolute income are major determinants of health. This is in contrast to results typically reported for developed countries, where in particular the household’s absolute income position appears to matter. The study provides important insights into the causes of health inequalities. For instance, higher income improves health directly because of higher social support and other psychosocial reasons. However, we failed to confirm IIH on pure statistical grounds.
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Notes
In its latest Human Development Report, the United Nations Development Programme (UNDP) provides a Gini coefficient of \(G=0.31\) for Pakistan (UNDP 2007).
Table 5 in Appendix, gives an overview of poverty and income inequality across the neighbouring countries.
The more recent study by UNDP (2007) reports identical coefficients for relevant benchmark countries such as the UK and the US. Figures for Bangladesh (\(G=0.33\)) and India (\(G=0.37\)), in comparison to Pakistan, seem to be on the rise which may be attributed to higher and more persistent economic growth lately.
It might be interesting to explore how results differ for relative wealth versus relative income; an issue we do not tackle here for data reasons.
Their analysis covered the following 14 OECD countries in alphabetical order: Australia, Belgium, Canada, Denmark, Finland, France, (former West) Germany, Italy, the Netherlands, Norway, Spain, Sweden, the UK, the US; excluding Luxembourg given its relatively small population size.
Source: Survey 2008.
Recall that our dataset considers cross-sections and focuses on rural Pakistan only.
The General Household Survey (GHS) is a survey conducted on an annual basis by the Office for National Statistics (ONS) and collects data about private households in Great Britain. The aim of this survey is to provide government departments and organisation with information on a range of topics concerning private households for monitoring and policy purposes.
See Li and Zhu (2006) for further methodological details.
In fractional ranking, items that compare equal receive the same ranking number, which is the mean of what they would have under ordinal rankings. Furthermore, in ordinal ranking, all items receive distinct ordinal numbers (1, 2, 3, and so on...), including items that compare equal.
We are using the words “community” and “district” interchangeably in the remainder.
Low social status/prestige and lack of control and awareness are often labelled as psychosocial determinants of health, even though they may be triggered by material factors such as lack of income or bad housing (Kawachi et al. 2002).
See Kawachi et al. (2002) for further methodological details.
Other alternatives to subsistence farming exist in the areas studied includes wage earnings from nonfarm labour including self employment, government and private-sector employment.
See the discussion by Deaton (2003).
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Acknolwledgments
I would like to thank Luis Angeles, Sai Ding, Richard Harris, Alexander Kadow, Philippe LeMay-Boucher and seminar participants at the University of Glasgow for helpful comments.
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Appendices
Appendix 1: Weighting Matrix
See Table 4.
Appendix 2: Overview of Poverty and Income Inequality Measures
See Table 5.
Appendix 3: Tables
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Shams, K. Income and Health Satisfaction: Evidence from Rural Pakistan. J Happiness Stud 16, 1455–1474 (2015). https://doi.org/10.1007/s10902-014-9568-6
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DOI: https://doi.org/10.1007/s10902-014-9568-6