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Spatial Inequality and Development - Is there an Inverted-U Relationship?

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  • Christian Lessmann

Abstract

This paper studies the hypothesis of an inverted-U-shaped relationship between spatial inequality and economic development. The theory of Kuznets (1955) and Williamson (1965) suggests that (spatial) inequality first increases in the process of development, then peaks, and then decreases. To test this hypothesis I have used a unique panel data set of spatial inequalities in 55 countries at different stages of economic development, covering the period 1980-2009. Parametric and semiparametric regressions are carried out using cross-section and (unbalanced) panel data. The results provide strong support for the existence of an inverted U, but importantly I also find spatial inequalities to increase again at very high levels of economic development. Although many factors may be contributing to this rise, one explanation rests on the process of tertiarization, i.e., the structural shift from industrial production towards a service base in the highest-developed economies.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3622.

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Date of creation: 2011
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Handle: RePEc:ces:ceswps:_3622

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Keywords: regional inequality; Kuznets curve; panel data; semiparametric estimates;

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Cited by:
  1. Holger Breinlich & Gianmarco I. P. Ottaviano & Jonathan R. W. Temple, 2013. "Regional Growth and Regional Decline," CEP Discussion Papers dp1232, Centre for Economic Performance, LSE.
  2. Christian Lessmann, 2012. "Foreign Direct Investment and Regional Inequality: A Panel Data Analysis," CESifo Working Paper Series 4037, CESifo Group Munich.
  3. Christian Lessmann, 2013. "Regional Inequality and Internal Conflict," CESifo Working Paper Series 4112, CESifo Group Munich.
  4. Georg Hirte & Christian Lessmann, 2014. "Trade, Integration, and Interregional Inequality," CESifo Working Paper Series 4799, CESifo Group Munich.

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