Socio-Economic Determinants of Health in Rural Pakistan: Relative or Absolute Standards?
Khadija Shams

Abstract
This paper addresses key aspects of health inequality. We analyse in par- ticular to what extent income determines household-specific health outcomes in rural Pakistan using our survey data. Controlling for various socio-economic characteristics, we investigate validity of the three income-health hypotheses: the Absolute Income Hypothesis (AIH), the Relative Income Hypothesis (RIH) and the Income Inequality Hypothesis (IIH). Whilst these hypotheses crucially differ in their exact substance, broadly speaking, those refer to the idea that a household’s health status might be linked to the existing socio-economic environment. Households with a more favourable income position (either in absolute, relative or distributional terms) might enjoy a better health sta- tus. We employ a general empirical specification that nests different health functions as special cases. This permits testing the income-health hypotheses separately and jointly. We find that in rural Pakistan both the relative in- come (with respect to the relevant community) and absolute income are major determinants of health. This is in contrast to results typically reported for developed countries, where in particular the household’s absolute income posi- tion appears to matter. The study provides important insights into the causes of health inequalities. For instance, higher income improves health directly because of higher social support and other psychosocial reasons. However, we failed to confirm IIH on pure statistical grounds.

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