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Kuznets Inverted U-Curve Hypothesis Examined on Up-To Date Observations for 145 Countries

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  • Oksana Melikhova
  • Jakub Čížek

Abstract

The Kuznets hypothesis of inverted U-curve dependence of the income inequality on the absolute value of the average income is still an unresolved issue despite the growing number of theoretical and empirical research on this topic. This paper analyzes the historical data on the average income and the income inequality for the period 1979-2009 collected for 145 countries. We found that the income inequality is influenced predominantly by governmental policy on subsidies and social transfers. Different amount of subsidies and social transfers across various countries makes the data biased. The inverted U-curve was found in countries with low amount of social contribution. However, increasing amount of social contributions makes the U-curve flat and shifts its maximum to higher values of the average income. Based on the experimental data a model describing the influence of both governmental policy and the level of economic development was developed.

Suggested Citation

  • Oksana Melikhova & Jakub Čížek, 2014. "Kuznets Inverted U-Curve Hypothesis Examined on Up-To Date Observations for 145 Countries," Prague Economic Papers, Prague University of Economics and Business, vol. 2014(3), pages 388-410.
    • Handle: RePEc:prg:jnlpep:v:2014:y:2014:i:3:id:490:p:388-410
    DOI: 10.18267/j.pep.490
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    More about this item

    Keywords

    Kuznets curve; inverted U-curve; income inequality; comparative theory;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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