Health and income inequality: Attempting to avoid the aggregation problem

Abstract

Attempts to test the relative deprivation hypothesis, that income inequality affects individual health, are subject to the aggregation problem. Waldmann (Quarterly Journal of Economics 107, 1992) ingeniously attempts to overcome the difficulty by using income data for the poor and the share of income accruing to the rich. The study finds that his results do not hold for a more recent data set and it suggests that his method may not overcome the aggregation problem.