Publication detail

KUZNETS INVERTED U-CURVE HYPOTHESIS EXAMINED ON UP-TO DATE OBSERVATIONS FOR 145 COUNTRIES

Author(s): Oksana Melikhova Ph.D., Jakub Čížek
Type: Articles in journals with impact factor
Year: 2014
Number: 3
ISSN / ISBN:
Published in: PRAGUE ECONOMIC PAPERS
Publishing place: http://www.vse.cz/pep/490
Keywords: Kuznets curve, inverted U-curve, income inequality, comparative theory.
JEL codes: O15, C23
Suggested Citation:
Abstract: The Kuznets hypothesis of inverted U-curve dependence of the income inequality on the absolute
value of the average income is still an unresolved issue despite the growing number of theoretical
and empirical research on this topic. This paper analyzes the historical data on the average income
and the income inequality for the period 1979-2009 collected for 145 countries. We found that the
income inequality is infl uenced predominantly by governmental policy on subsidies and social
transfers. Different amount of subsidies and social transfers across various countries makes the
data biased. The inverted U-curve was found in countries with low amount of social contribution.
However, increasing amount of social contributions makes the U-curve fl at and shifts its maximum
to higher values of the average income. Based on the experimental data a model describing the
infl uence of both governmental policy and the level of economic development was developed.

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