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Aggregation bias-correcting approach to the health–income relationship: Life expectancy and GDP per capita in 148 countries, 1970–2010

Mikael Linden and Devdatta Ray

Economic Modelling, 2017, vol. 61, issue C, 126-136

Abstract: A large amount of data consisting of 148 countries for the years 1970 to 2010 is analysed in the context of the health–income relationship. The literature suggests that the biased income–health effect obtained with macro data can be a result of the aggregation of individual concave income functions on average health. This aggregation problem is analysed in detail, and a bias-correcting method is proposed to overcome it. The results with new model alternatives show that they correct the income effects on average health in the right direction; that is, they produce smaller parameter estimates than biased models. Augmenting the results with the quantile regression approach, which is sensitive to health differences between countries, indicates that the poorest countries’ income gradient is still much larger than that of rich countries. However, the median life expectancy effect of the log of GDP per capita across the countries decreased during the sample decennials. The results for income inequality measured with the Gini coefficient indicate that the effects of inequality on health are still significant in the poorest countries but non-significant among rich countries after the year 2000. We argue that the proposed bias-correcting method retains the interest in macro health modelling and offers new model alternatives in other contexts.

Keywords: Income-related health; Income inequality; Aggregation; Errors-in-variables bias (search for similar items in EconPapers)
JEL-codes: I14 E19 C2 (search for similar items in EconPapers)
Date: 2017
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