A CROSS-COUNTRY INVESTIGATION OF INEQUALITY AND GROWTH WITH THEIL INDEXES

Abstract

In our study, we investigate empirically any systematic relationship between income inequality and economic growth in both directions; the effects of growth or development on inequality (the Kuznets hypothesis) and the effects of inequality on subsequent growth. The study is carried out in a traditional cross-country estimation using recently updated data on several variables and Theil indexes as inequality measures. The relationship between inequality and growth are investigated in different samples for two periods; 1965-1985 and 1985-2005 peiods. Our findings do not support the Kuznets hypothesis; the inverted-U relationship between per capita income and inequality seems to be an artificial statistical fact as a consequence of the Latin American countries clustering in the middle, with high inequalities. But our estimation results show that poor countries are statistically more unequal than richer countries and that inequality tends to fall over the course of development. Our estimation results do not also show any statistically significant relationship between inequality and subsequent growth. 

Keywords

• income inequality,distribution,growth,development,Theil index,human capital,Kuznets hypothesis,Latin effect

A CROSS-COUNTRY INVESTIGATION OF INEQUALITY AND GROWTH WITH THEIL INDEXES

Abstract

Çalışmamızda gelir eşitsizliği ile ekonomik büyüme arasında herhangi bir sistematik ilişki olup olmadığını ampirik olarak araştırdık; ilişki, büyüme ya da gelişmenin eşitsizlik üzerine etkileri (Kuznets hipotezi) ve eşitsizliğin daha sonraki büyüme üzerine etkileri olarak iki yönlü olarak ele alınmıştır. Geleneksel ülkelerarası kesit tahmin yöntemi ile yürütülen çalışmamızda birçok değişken için yakın zamanda yenilenmiş veriler ve eşitsizlik ölçütleri için Theil endeksleri kullanılmıştır. Eşitsizlik ve büyüme arasındaki ilişki değişik örneklemlerle 1965-1985 ve 1985¬ 2005 olmak üzere iki dönemde araştırılmıştır. Bulgularımız Kuznets hipotezini desteklememektedir. Kişi başına gelir ile eşitsizlik arasındaki ters-U şeklinde bir ilişki, yüksek eşitsizliklere sahip Latin Amerika ülkelerinin ortada kümelenmelerinden dolayı yapay istatistiksel bir olgu olarak gözükmektedir. Ancak tahmin sonuçlarımız fakir ülkelerin zenginlere göre istatistiksel olarak daha eşitsiz olduklarını ve gelişme süreci içinde eşitsizliğin düşme eğiliminde olduğunu göstermektedir. Tahmin sonuçlarımız ayrıca eşitsizlik ve sonraki büyüme arasında istatistiksel olarak anlamlı bir ilişki göstermemektedir.

Keywords

• gelir eşitsizliği, dağılım, büyüme, gelişme, Theil endeksi, beşeri sermaye, Kuznets hipotezi, Latin etkisi

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