Department of Economics. University of Melbourne. Parkville Victoria
3052 Australia
ABSTRACT
In Kuznets's (1955) classic paper on the relationship between economic
growth and income inequality, the process of population shift from traditional
to modern activities forms the basis for a theory of distributional change
during the process of development. This relationship, known as Kuznets's
law, which postulates that income inequality first increases and then decreases
during the development process, is re-examined in this paper using data
for fifteen developing countries. The rationale behind Kuznets's law, that
is the intersectoral population shift, know as the Kuznets process, is
also tested. Using the Atkinson index of inequality, which allows for different
degrees of aversion to inequality, this paper does not find conclusive
evidence in support of either Kuznets's law or process. Further, once we
allow for variations in both the functional form, and the degree of aversion
to inequality, the results produce widely differing shapes for the inequality-development
relationship.
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