The Importance of Increasing Income vs. Increasing Income Inequality for Improvements in Survival - Findings from the Natural Experiment of German Reunification

Tobias C. Vogt, Max Planck Institute for Demographic Research
Fanny Kluge, Max Planck Institute for Demographic Research

The inverse relationship between income inequality and mortality is found within and between populations. These studies suggest that life expectancy is lower where income inequality is most severe. Consequently, life expectancy levels would rise as income disparities narrow. In our study, we use the German reunification as a natural experiment to test this relationship. Before reunification, the socialist East Germany was egalitarian in terms of income distribution and lower life expectancy. After reunification mean income rose for all ages but also income inequality widened. At the same time life expectancy increased very quickly mainly for the elderly. We use Gini and Theil indexes for the years 1988-2008 to measure income inequality and decompose them into contributions from age and sex. Our study seeks further to disentangle the contribution of rising income and increasing inequality on the changes in life expectancy.