Income inequality and mental health--empirical evidence from Australia

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 hypotheses. 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.