Nexus between income inequality and health outcomes in Ethiopia

Abstract This study investigates the nexus between income inequality and health outcomes in Ethiopia over the period 1970–2024 using a Co-Integrated Vector Autoregressive (CVAR) approach. Employing time series data from international and national sources, the analysis applies both Vector Autoregression (VAR) and Vector Error Correction Model (VECM) techniques to capture the short-run dynamics and long-run equilibrium relationships among income inequality (measured by the Gini coefficient), life expectancy, and mortality rate. The Johansen co-integration test confirms the presence of long-run relationships among the variables, while Granger causality tests reveal bidirectional influences between inequality and health outcomes. The long-run results indicate that higher income inequality significantly increases mortality and reduces life expectancy, whereas improvements in life expectancy contribute to lowering inequality. Conversely, higher mortality exacerbates inequality, reflecting a cyclical relationship between poor health outcomes and economic disparities. In the short run, income inequality exerts a strong and immediate effect on mortality, while gains in life expectancy quickly reduce death rates but can temporarily widen inequality due to uneven distribution of health benefits. These findings underscore that income inequality highly affects mortality in the short run, while it strongly influences life expectancy in the long run. Overall, the study provides robust empirical evidence that income inequality and health outcomes in Ethiopia are strongly co-integrated, with inequality acting as both a cause and consequence of poor health. The results highlight the critical importance of considering income distribution in efforts to improve population health and promote sustainable development.