Income inequality and life expectancy: A study on inequality and its potential effect on longevity

The potential effects of income inequality have received much attention from researcher and policy-makers in recent years. Income inequality is found by many researchers to have negative effect on health outcomes, crime rates and long-term economic growth. Previous studies have focused mainly on developed countries due to data availability. This study aims at further investigate the hypothesis of income inequality’s effect on life expectancy by using a panel which also includes developing countries. The Palma ratio for measuring income inequality is used, which largely increase the number of countries and observations included in the analysis compared to previous studies. The ratio consists of the top 10 percent of the income share divided with the bottom 40 percent. The Palma ratio inequality measure is more sensitive to changes in income inequality compared to the Gini-coefficient and allows for more variation in the inequality measure, allowing for more statistical power with the use of a fixed effects model. The Palma ratio has to my knowledge not been used in studies looking at income inequality and life expectancy. The results of this study indicate that income inequality is strongly associated with life expectancy and finds a cut-off point for the effect of GDP per capita on longevity, supporting the previous findings of diminishing effect of GDP per capita on life expectancy