Analyzing the Kuznets Relationship using Nonparametric and Semiparametric Methods

Li, Kui-Wai (2012): Analyzing the Kuznets Relationship using Nonparametric and Semiparametric Methods. Published in: CIRJE Discussion Paper No. CIRJE-F-839 (January 2012)

Abstract

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
• Language: English
• Keywords: Kuznets inverted-U; Nonparametric and semiparametric models; Unbalanced panel data
• Subjects: O - Economic Development, Innovation, 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 - Panel Data Models ; Spatio-temporal Models

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