Conditional and unconditional inequality and growth relationships

Abstract

This study tests the conditional and unconditional relationship between income inequality and growth in the post-Second World War period using WIDER inequality database. Regression results suggest that income inequality is declining over time. Inequality is also declining in growth of income. There is a significant regional heterogeneity in the levels and development of inequality over time. The Kuznets hypothesis represents a global U-shape relationship between inequality and growth.

Notes

¹ The Kuznets (1955) hypothesis here postulates an inverted-U relationship between income and inequality according to which the degree of inequality would increase first and than decrease with level of income or economic growth.