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Whether the Kuznets curve has changed slope over time is tested in table 2 which adds time shift variables (i.e., time and interactions of the Kuznets curve with time) to the variables of table 1. Any time shift would imply that the results from a cross section of countries could not be used to predict the secular development of a country. The results indicate a relatively fast flattening of the curve. The joint significance of the three time shift variables for the Kuznets curve (based on an F-test) appears to be significant for GINI but not for the SHARE when entered early. Its marginal significance when entered after other factors is low. The evidence on the stability of the Kuznets curve is therefore ambiguous. However, it seemed worth testing since the possible weakening of the Kuznets curve has never been raised, finds some support, could be important and could readily be tested in a few years. If the estimated time shift continues, the Kuznets curve would have all but disappeared by the early 1980s.

 

Table 3 reports a direct test of the intertemporal Kuznets curve. On a subsample of countries with observations at two or more points in time, it is possible to estimate the inter-temporal Kuznets curve assuming that all countries have parallel Kuznets curves with identical slopes but individual, country specific, levels of income inequality.5 Again the model was estimated with corrective dummies, two Kuznets curve variables LINN and LIN2 but no time or time interactions (i.e., restrictions g = f = l = 0 were imposed) and all the Xi variables were replaced by a set of country specific dummy variables. This implies that although the regression uses pooled cross-section and time series data it does not assume that cross-sectionally the countries lie on the Kuznets curve. For GINI the Kuznets curve coefficients have the right signs and surprisingly similar values to those in' table 1. They are, however, significant only at 20% and 10% levels. For SHARE they have the wrong sign and are insignificant. These are not very strong tests, because we have few observations for each country. But the inter-temporal analysis provides only partial support for the Kuznets hypothesis.Footnote6

 

 

 

 

 

 

 

 

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