TITLE

Kuznets's Inverted-U Hypothesis: Evidence from a Highly Developed country

AUTHOR(S)
Ram, Rati
PUB. DATE
April 1991
SOURCE
Southern Economic Journal;Apr91, Vol. 57 Issue 4, p1112
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
The main theme pursued in this work is to model the relation between income inequality and economic growth in terms of Kuznets's hypothesis, and to make yet another empirical assessment of the model. The point of departure of the work from previous studies is the use of good data that span about half a century and pertain to a highly developed country. Estimates of the usual Kuznets-type quadratic equation from time-series observations for a 42-year period for the United States and cross-sections of U.S. states for 1949, 1959, 1969 and 1979 do not show the predicted structure, and also indicate absence of a monotonic decline in inequality even at such a high development level. On the contrary, a fairly pervasive uninverted U-shaped pattern of initial decline and subsequent increase in inequality is observed. One could perhaps rationalize the observed pattern by treating it as a "short run" or "local" departure from the long-run Kuznets-curve. Even then, however, it is obvious that such departures are quite substantial and can last several decades. Methodologically, two points are noted. First, results in Table I from Gini coefficient and Bourguignon's L are almost identical. Second, a comparison of the estimates in Table I and Table II suggests that while the broad pattern revealed by the estimates from time-series observations is similar to that indicated by cross-section data, there are some significant differences. In particular, the (uninverted) U-curve structure appears much sharper in time-series observations and the turning point lies near the middle of the period.
ACCESSION #
4627247

 

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