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Reassessing the relationship between inequality and development

  • Hugo Rojas-Romagosa


  • J.F. Francois

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.

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Paper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Paper with number 107.

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Date of creation: Jun 2008
Date of revision:
Handle: RePEc:cpb:discus:107
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