According to the relative income hypothesis, an individual’s health depends on the distribution
of income in a reference group, as well as on the income of the individual. We use data on
231,208 individuals in Great Britain from 19 rounds of the General Household Survey
between 1979 and 2000 to test alternative specifications of the hypothesis with different
measures of relative income, national and regional reference groups, and two measures of
self assessed health. All models include individual education, social class, housing tenure,
age, gender and income. The estimated effects of relative income measures are usually
weaker with regional reference groups and in models with time trends. There is little evidence
for an independent effect of the Gini coefficient once time trends are allowed for. Deprivation
relative to mean income and the Hey-Lambert-Yitzhaki measures of relative deprivation are
generally negatively associated with individual health, though most such models do not
perform better on the Bayesian Information Criterion than models without relative income. The
only model which performs better than the model without relative income and which has a
positive estimated effect of absolute income on health has relative deprivation measured as
income proportional to mean income. In this model the increase in the probability of good
health from a ceteris paribus reduction in relative deprivation from the upper quartile to zero is
0.010, whereas as an increase in income from the lower to the upper quartile increases the
probability by 0.056. Measures of relative deprivation constructed by comparing individual
income with incomes within a regional or national reference group will always be highly
correlated with individual income, making identification of the separate effects of income and
relative deprivation problematic
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