Li, Kui-Wai (2012): Analyzing the Kuznets Relationship using Nonparametric and Semiparametric Methods. Published in: CIRJE Discussion Paper No. CIRJE-F-839 (January 2012)
Download (558Kb) | Preview
This paper studies the income inequality and economic development relationship by using unbalanced panel data of OECD and non-OECD countries for the period 1962 - 2003. The nonparametric estimation results show that income inequality in OECD countries are almost on the backside of the inverted-U relationship, while non-OECD countries are approximately on the foreside, except that the relationship in both country groups shows an upturn at a high level of development. Development has an indirect effect on inequality through control variables, but the modes are different in the two country groups. The model specification tests show that the relationship is not necessarily captured by the conventional quadratic function. The cubic and fourth-degree polynomials, respectively, fit the OECD and non-OECD country groups best. The finding is robust regardless whether the specification uses control variables. Development plays a dominant role in mitigating inequality.
|Item Type:||MPRA Paper|
|Original Title:||Analyzing the Kuznets Relationship using Nonparametric and Semiparametric Methods|
|Keywords:||Kuznets inverted-U; Nonparametric and semiparametric models; Unbalanced panel data|
|Subjects:||O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development
C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C14 - Semiparametric and Nonparametric Methods: General
C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models; Multiple Variables > C33 - Models with Panel Data; Longitudinal Data; Spatial Time Series
|Depositing User:||Kui-Wai Li|
|Date Deposited:||09. Feb 2012 09:44|
|Last Modified:||19. Feb 2013 08:19|
Acemoglu, D., 2001. Good jobs versus bad jobs. Journal of Labor Economics 19 (1): 1-21.
Albanesi, A., 2007. Inflation and inequality. Journal of Monetary Economics 54: 1088- 1114.
Anand, S., 1993. The Kuznets process and the inequality-development relationship. Journal of Development Economics 40 (1): 25-52.
Baltagi, Badi H., 2008. Econometric Analysis of Panel Data. Fourth Edition, John Wiley & Sons, Ltd.
Barro, Robert J., 1999. Inequality, Growth and Investment. NBER Working Paper No. 7038.
Barro, Robert J., 2000. Inequality and growth in a panel of countries. Journal of Economic Growth 5: 5-32.
Bẻnabou. R., 1996. Inequality and growth. In Bernanke, B. and Rotemberg, J. (Eds.), National Bureau of Economic Research Macroeconomics Annual, MIT Press, 11-74.
Bulíř, Aleš, 2001. Income inequality: Does inflation matter? IMF Staff Papers 48: 139-159.
Chen, Been-Lon, 2003. An inverted-U relationship between inequality and long-run growth. Economics Letters 78: 205-212.
Desai, R. M., Olofsgard, A. and Yousef, T. M., 2005. Inflation and inequality: does political structure matter? Economic letters 87: 41-46.
Frankel, F. and Rose, A., 2002. An estimate of the effect of common currencies on trade and income. Quarterly Journal of Economics 117 (2): 437-466.
Galor, O. and Maov, O., 2000. Ability biased technological transition, wage inequality and economic growth. Quarterly Journal of Economics 115: 469-498.
Galor, O. and Zeira, J., 1993. Income distribution and macroeconomics. Review of Economic Studies 60: 35-52.
Gould, E., Maov, O. and Weinberg, B. A., 2001. Precautionary demand for education, inequality and technological progress. Journal of Economic Growth 6:285-315.
Henderson D. J., Carroll, R. J. and Q. Li, 2008. Nonparametric estimation and testing of fixed effects panel data models. Journal of Econometrics 144: 257-275.
Huang, Ho-Chuan River, 2004. A flexible nonlinear inference to the Kuznets hypothesis. Economics Letters 84: 289-296.
Huang, Ho-Chuan River, Lin, Yi-Chen, and Yeh, Chih-Chuan, 2009. Joint determinations of inequality and growth. Economics Letters 103: 163-166.
Iradian, Garbis, 2005. Inequality, poverty, and growth: cross-country evidence. Working Paper No. 05/28. International Monetary Fund, Washington.
Julien, Gourdon, 2007. Openness and inequality in developing countries: a new look at the evidence. MPRA Paper No. 4176, November.
Kanbur, Ravi, 2000. Income distribution and development. In: Atkinson, Anthony B., Bourguignon, Francious (Eds.), Handbook of Income Distribution. Elsevier, 791-841.
Keane, M.P. and Prasad, E., 2002. Inequality, transfer, and growth: new evidence from the economic transition in Poland. Review of Economics and Statistics 84(2): 324-341.
Kuznets, Simon, 1955. Economic growth and income inequality. American Economic Review 45: 1-28.
Li, Hongyi, Squire, Lyn, and Zou, Heng-Fu, 1998. Explaining international and intertemporal variations in income inequality. Economic Journal 108: 26-43.
Lin, Shu-Chin, Huang, Ho-Chuan, and Weng, Hsiao-Wen, 2006. A semiparametric partially linear investigation of the Kuznets’ hypothesis. Journal of Comparative Economics 34, 634-647.
Milanovic, Branko, 2005. Worlds Apart: Measuring International and Global Inequality, Princeton University Press.
Mushinski, David W., 2001. Using non-parametrics to inform parametric tests of Kuznets’ Hypothesis. Applied Economics Letters 8: 77-79.
Ram, R., 1991. Kuznets’ inverted U hypothesis: evidence from a highly developed country. Southern Economic Journal 57, 1112-23.
Ravallion, M., 2003. Inequality convergence. Economics Letters 80: 351-356.
Sen, Amartya K., 1991. Presidential address: the nature of inequality. In Arrow, Kenneth (Ed.), Issues in Contemporary Economics, Volume 1: Markets and Welfare, MacMillan Academic and Professional Ltd., 3-21.
Sen, Amartya K., 1992. Inequality Reexamined, Harvard University Press.
Sen, Amartya K., 1993. Capability and well-being. In Nussbaum, Martha, and Sen, A. K. (Eds), The Quality of Life, Clarendon Press, 30-53.
Wan, Guang Hua, 2002. Income Inequality and Growth in Transition Economies: Are Nonlinear Models Needed? Discussion Paper No. 2002/104, World Institute for Development Research, United Nations University.
Wang, Xiaolu, 2006. Income Inequality in China and Its Influencing Factors. Research Paper No. 2006/126, World Institute for Development Research, United Nations University.
Wood, Adrian, 1997. Openness and wage inequality in developing countries: the Latin American challenge to East Asian conventional wisdom. World Bank Economic Review 11(1): 33-57.