An alternative check of the validity of Kuznets' hypothesis
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2016-08-25
Language
en
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Abstract
This study investigates whether the Kuznets curve relationship is supported by using
another proxy of economic development as applied to developing countries. Using data from
17 countries with 154 subnational regions for the year 2000, inequality is measured using a
Gini coefficient based on the possession of assets. The proxy used for economic development
is occupational structure, which is measured in two ways: as the percentage of employed men
working in the (1) lower or (2) upper non-agricultural sector. Other influences on income
inequality are also taken into account, while the parametric approach includes corrections for
multicollinearity. The estimation results support the original Kuznets curve relationship. The
effects are higher for upper non-agricultural occupations than for lower non-agricultural
occupations. However, these findings are not robust with respect to variations in control
variables and interaction terms. When adding control variables and interaction terms, the
expected signs were found, but only the quadratic term remains significant. Some control
variables, such as urbanization and education, have a significant effect on inequality. No
interaction term has a significant effect. From a policy perspective, the results support the
need for locally targeted coordinated efforts to address the problems of literacy and to
increase connections between rural and urban areas.
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Faculteit der Managementwetenschappen