There is still much uncertainty about the impact of income inequality on health and mortality. Some studies have supported the original hypothesis about adverse effects, while others have shown no effects, and a few even indicated beneficial effects. In this investigation, register data covering the entire Norwegian population were used to estimate how income inequality in the municipality of residence, measured by the Gini coefficient, affected mortality in men and women aged 30-89 in the years 1980- 2002, net of their individual incomes. The total exposure time was about 55 million person years, and there were about 850000 deaths. Adverse effects were estimated when individual and average income and some other commonly used control variables were included in the models. However, because there are annual measurements in each municipality, the data provide a rare opportunity to include also municipality fixed-effects, to pick up time-invariant unobserved factors at that level. When this was done, there was actually more evidence for beneficial than for adverse effects. In addition to illustrating the potential importance of the fixed-effects approach, these findings should add to the scepticism about the existence of harmful health effects of income inequality, and especially in a Nordic context.