Association for Public Policy Analysis & Management

This paper examines the relationship between income inequality and infectious disease. It has been controversial whether income inequality harms health. Our study suggests a mechanism that income inequality affects the transmission of infectious disease due to its externalities. Infectious disease that spreads through interaction can harm even rich people when income inequality is high. Assuming health is an increasing and concave function of income, low income people have a higher probability of becoming infected to a communicable disease relative to rich people when both are exposed to the same risk. Thus, comparing two countries where the average income is the same but different income inequality, a country with higher inequality have more people that are susceptible. In addition, assuming people in each economy interact randomly with each other, once there are infected people, communicable disease can spread through interactions. This implies that even rich people in an unequal economy have a higher chance of becoming infected comparing to people in an equal society. Unlike non-communicable disease, infectious disease can compromises the health of all people in the community due to its externalities and this can be exacerbated when income inequality is high. Using country level data, we showed that countries with higher Gini coefficient have a higher Tuberculosis incidence rate while Gini did not increase the incidence of non-communicable disease such as cancer or diabetes.