Inequality and development: is the Kuznets curve in effect today?
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Inequality and development: is the Kuznets curve in effect today? Diego Martínez‑Navarro1 · Ignacio Amate‑Fortes1 · Almudena Guarnido‑Rueda1 Received: 25 April 2018 / Accepted: 26 June 2020 © Springer Nature Switzerland AG 2020
Abstract The aim of this work is to study the Kuznets curve in order to examine whether the hypothesis on inequality and development that he posited in his 1955 article is verified or not when using the data at our disposal today; these data are more numerous, both for countries and periods available, than when Kuznets originally conducted his study. The approach that makes this research unique is that it will be performed by differentiating the sample in terms of underdeveloped and developed countries. In this regard, at present (with the data and methodologies of Cochrane– Orcutt and GMM System), the Kuznets hypothesis seems to be robustly verified because, when taking a variable other than the Log GDPpc (GDP per capita in logarithms) as a measure of development, such as the HDI or the proportional contribution of the agricultural sector on GDP, the relationship described by Kuznets still seems to be present; this is not a regularity when using the basic GDPpc variable. Moreover, it has been observed that, over the very long term, the Milanovic hypothesis seems to appear; namely, that inequality follows a sinusoid form rather than a concave curve. Finally, a section has been included in which we see how the 3 effects (scale, technique and composition) of world trade on inequality affect, as has been applied in recent years on C O2 emissions in the Environmental Kuznets Curve. Keywords Kuznets curve · Economic inequality · Development JEL classification D63 · O10 · O11 * Diego Martínez‑Navarro [email protected] Ignacio Amate‑Fortes [email protected] Almudena Guarnido‑Rueda [email protected] 1
Faculty of Economics and Business, University of Almería, La Cañada de San Urbano, Ctra. Sacramento s/n, 04120 Almería, Spain
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Vol.:(0123456789)
Economia Politica
1 Introduction Why does income distribution vary between countries? This has been one of the great issues of the last century. Why greater inequality exists in some countries than in others has been studied using several explanatory factors; yet even today, no single answer has emerged. Taking advantage of the increased availability of information, although not abundant, these studies have tried to find solid conclusions. In this paper, we attempt to contrast one of the theories that has generated most controversy regarding inequality; that proposed by Simon Kuznets in 1955 in his article “Economic growth and income inequality”. Our novel approach uses the GDPpc in logarithms as the measure of development, expanding the model with variables that collate the country’s level of democracy and education, as well as a classification that divides the sample into developed and underdeveloped countries. This theory needs revisiting because of the relevance of inequality seen in presentday economies, and for its capacity to undermine welfare
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