456. Income Inequality and Mental Health

Grace Lordan, Prasada Rao & Lucy Bechtel, School of Economics Discussion Paper No. 456, March 2012, School of Economics, The University of Queensland. Australia.

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Abstract

The causal association between absolute income and health is well established, however the relationship between income inequality and health is not. The conclusions from the received studies vary across the region or country studied and/or the methodology employed. Using the Household, Income and Labour Dynamics in Australia panel survey, this paper investigates the relationship between mental health and inequality in Australia. A variety of income inequality indices are calculated to test both the Income Inequality and Relative Deprivation Hypothesis. We find that mental health is only adversely affected by the presence of relative deprivation to a very small degree. In addition we do not find support for the Income Inequality Hypothesis. Importantly our results are robust to a number of sensitivity analyses.