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This paper studies the income inequality and economic development relationship by using unbalanced panel data of OECD and non-OECD countries(regions)for the period 1962-2003.The nonparametric estimation results show that income inequality in OECD countries is 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 fourthdegree polynomials,respectively,fit the OECD and non-OECD country groups best.Our finding is robust regardless of whether the specification uses control variables.Development plays a dominant role in mitigating inequality.
This paper studies the income inequality and economic development relationship by using unbalanced panel data of OECD and non-OECD countries (regions) for the period 1962-2003. Nonparametric estimates results show that income inequality in OECD countries is 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. model model tests show that the relationship is not hereby captured by the conventional quadratic function. cubic and fourth degree free polynomials, respectively, fit the OECD and non-OECD country groups best. Our finding is robust regardless of whether the specification uses control variables. Development plays a dominant role in mitigating inequality.