Reassessing the relationship between inequality and development

Joseph Francois () and Hugo Rojas-Romagosa ()

CPB Discussion Papers from CPB Netherlands Bureau for Economic Policy Analysis

Abstract: We reassess the empirical relevance of the Kuznets Curve with a new inequality dataset. Using panel data estimations that account for the heterogeneity of inequality observations, we test for both the unconditional and the conditional hypothesis that includes alternative inequality determinants. We find that inequality and income levels are related in a cubic function or "tilde-pattern". This novel finding does not contradict the traditional Kuznets hypothesis, but extends it. Increasing inequality in OECD countries during recent years suggests that inequality rises at high levels of economic development. This "tilde-pattern" is robust to different inequality indicators, estimation techniques and control variables.

Keywords: Income distribution; Kuznets curve; Gini coefficient; Atkinson index (search for similar items in EconPapers)
JEL-codes: D31 O15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dev, nep-geo and nep-lab
Date: 2008-06
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Persistent link: http://EconPapers.repec.org/RePEc:cpb:discus:107

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