The effect of income growth and inequality on health inequality: Theory and empirical evidence from the European Panel

Governments of EU countries have declared that they would like to couple income growth with reductions in social inequalities in income and health. We show that, theoretically, both aims can be reconciled only under very specific conditions concerning the type of growth and the income responsiveness of health. We investigate whether these conditions were met in Europe in the 1990s using panel data from the European Community Household Panel. We demonstrate that (i) in most countries, the income elasticity of health was positive and increases with income, and (ii) that income growth was not pro-rich in most EU countries, resulting in small or negligible reductions in income inequality. The combination of both findings explains the modest increases we observe in income-related health inequality in the majority of countries.