Validity of the kuznets hypothesis in high and upper middle income countries: An econometric analysis

In this study, the validity of the Kuznets hypothesis in high and upper-middle-income countries was investigated by panel data analysis in the 1990-2018 period. The course of income inequality in the economic development process was discussed within the framework of the Kuznets hypothesis by using two different economic development indicators. In the analyses, both GDP per capita and the Human Development Index (HDI) were used as indicators of economic development. Cointegration analysis was performed by establishing two different models, and it was made long-term coefficient estimations. The cointegration relationship was investigated with the cointegration test developed by Westerlund and Edgerton (2007) panel cointegration test, and the long-term coefficients were obtained by the AMG (Augmented Mean Group) estimation method. In the study, the empirical findings have shown that contrary to the Kuznets Hypothesis, a dominant U-shaped relationship exists in both groups of countries examined. Furthermore, the results obtained indicate that the HDI, which is used as an alternative economic development indicator in the study, has a higher explanatory power for income inequality considered compared to the GDP per capita.