Income Inequality and Health: Lessons from a Residential Assignment Program*

1. INTRODUCTION This paper investigates how income inequality affects health. An enormous literature in several disciplines has shown that inhabitants in areas with greater income inequality suffer from worse health and higher mortality rates (see reviews by e.g. Deaton 2003; Leigh, Jencks and Smeeding 2009; Wilkinson and Pickett 2006). The magnitude of the estimates in some of these studies is strikingly large. For instance, Lynch et al. (1998) find that the annual loss of lives from income inequality in the US is comparable to the combined loss of lives from lung cancer, diabetes, motor vehicle crashes, HIV, suicide and homicide. If valid, the results suggest that the rising levels of income inequality witnessed in many industrialized countries during the past decades (Gottschalk and Smeeding 2000) may have far reaching consequences for public health and that policies to combat inequality can bring major health benefits to society. This may especially be true for many minority groups living in areas characterized by high levels of income inequality (Deaton and Lubotsky 2002). There are two theories linking income inequality