The dynamics of the gradient between child's health and family income: Evidence from Canada

Children from low-income families are on average associated with poorer health. Using data on 8, 019 children from who participated in the first five cycles of the Canadian National Longitudinal Survey of Children and Youth (1994/95-2002/03), we find that the gradient of family income on children's health is statistically significant and becomes more pronounced as children age. This conclusion is consistent with some previous studies and the results are more robust in that the Health Utilities Index Mark 3 is used as an alternative measure of children's health, which is conventionally measured using ordinal self-rated health. We also observe that the strong gradient withstands some "third factor" explanations such as parental health and children's health at birth. However, regarding the potential causes of the strong and steepening gradient, contrary to the previous U.S. evidence that attributes part of the gradient to the protective effect of family income on the incidence and severity of children's health problems at birth and chronic conditions (Case et al., 2002), we find no evidence suggesting that children from low-income families suffer more from poor health at birth or recover more slowly from poor health at birth and that higher family income reduces the incidence of chronic conditions or buffers the adverse effects of chronic conditions. The contrast between Canadian and U.S. children may reflect the effects of universal health insurance in Canada. Furthermore, using local unemployment rates to instrument for family income, we find that family income has a statistically significant and economically meaningful causal effect on children's health and that OLS estimates may underestimate the positive impact of family income on children's health. Our findings suggest that universal health insurance may cushion the adverse effects of poor health at birth and chronic conditions but does not eliminate the strong income-related inequality in child health.