Health, inequality and income: a global study using simultaneous model

Abstract

A simultaneous three-equation model is specified between GDP per capita (GDPc) level, infant mortality rate and health expenditures for 194 countries from 1990 to 2014. GMM-2SLS estimation results indicate that simultaneous decreasing infant mortality rate and increasing GDPc level effects are found in sample with three income level country groups. Health expenditures have larger than one elasticity when effects from GDPc level and number of doctors per capita are summed together. Increase in income inequality measured with GINI coefficient increases infant mortality rate in non-poor countries. We test for Kuznets’ hypothesis maintaining a positive GDPc level income inequality relationship in poor countries contrary to rich ones. Kuznets’ hypothesis is not rejected for poor countries with proposed ∩-shaped GDPc function on GINI that also identifies the negative income inequality effects on GDPc growth. In poorest countries, the possible Kuznets’ hypothesis and involved low-income high-inequality trap can be eliminated by raising health expenditures– GDPratio and with cost-effective health technology. Breaking the possible negative relationship between income inequality and health status in these countries makes health promotion policy and positive income–health path to develop smoothly.