The relationship between income inequality and long-run economic growth has gained a growing attention in economic research for over decades. This study employed advanced time series techniques to examine the existence of an inverted U-shaped long-run relationship between income inequality and economic growth, using long-span time series data for the United States between the periods 1917–2012. The concepts of summability, balancedness and co-summability was advanced to analyze nonlinear long-run relations among stochastic processes. The empirical results find no evidence in support of nonlinear long-run (inverted U-shaped) relationship for the US, but findings from a vocal set of economists lends strong support and is the basis for the conclusions drawn by this study.
This is a preview of subscription content, log in to check access.
Buy single article
Instant access to the full article PDF.
Price includes VAT for USA
Subscribe to journal
Immediate online access to all issues from 2019. Subscription will auto renew annually.
This is the net price. Taxes to be calculated in checkout.
In this study we use income per capita and economic growth synonymously.
For an exposition on the estimation of this series and file including percentile threshold see Frank, Sommeiller–Price and Saez. Interested reader for further explanation on estimation of other measures of income share or distribution should see Frank (2009).
Ahluwalia, M. S. (1976). Inequality, poverty and development. Journal of Development Economics, 3(4), 307–342.
Alesina, A., & Rodrick, D. (1994). Redistributive politics and economic growth. Quarterly Journal Economics, 109, 465–490.
Anand, S., & Kanbur, S. R. (1993). The Kuznets process and the inequality—Development relationship. Journal of Development Economics, 40(1), 25–52.
Babu, M. S., Bhaskaran, V., & Venkatesh, M. (2016). Does inequality hamper long run growth? Evidence from emerging economies. Economic Analysis and Policy, 52(4), 99–113.
Banerjee, A. V., Duflo, E. (2000). Inequality and growth: What can the data say? (No. w7793). National bureau of economic research.
Barro, R. J. (2000). Inequality and growth in a panel of countries. Journal of Economic Growth, 5(1), 5–32.
Berenguer-Rico, V., & Gonzalo, J. (2013). Co-summability from linear to nonlinear cointegration. Universidad Carlos III de Madrid, Departamento de Economía.
Berenguer-Rico, V., & Gonzalo, J. (2014). Summability of stochastic processes—A generalization of integration for nonlinear processes. Journal of Econometrics, 178, 331–341.
Braulke, M. (1983). A note on Kuznets’s U. Review of Economics and Statistics, 65, 135–139.
Chan, K. S., Zhou, X., & Pan, Z. (2014). The growth and inequality nexus: The case of China. International Review of Economics and Finance, 34(4), 230–236.
Chen, B. L. (2003). An inverted-U relationship between inequality and long-run growth. Economics Letters, 78(2), 205–212.
Cingano, F. (2014). Trends in income inequality and its impact on economic growth. OECD social, employment and migration working papers, No. 163, OECD Publishing, Paris. http://dx.doi.org/10.1787/5jxrjncwxv6j-en.
Fang, W., Miller, S. M., & Yeh, C. C. (2015). The effect of growth volatility on income inequality. Economic Modelling, 45(1), 212–222.
Forbes, K. J. (2000). A reassessment of the relationship between inequality and growth. American Economic Review, 90(4), 869–887.
Fosu, A. K. (1993). Kuznets’s inverted-U hypothesis: Comment. Southern Economic Journal, 59(3), 523–527.
Frank, M. W. (2009). Inequality and growth in the United States: Evidence from a new state-level panel of income inequality measures. Economic Inquiry, 47(1), 55–68.
Gonzalo, J., & Pitarakis, J. Y. (2006). Threshold effects in cointegrating relationships. Oxford Bulletin of Economics and Statistics, 68(s1), 813–833.
Hamilton, J. D. (2001). A parametric approach to flexible nonlinear inference. Econometrica, 69(3), 537–573.
Hamilton, J. D. (2003). What is an oil shock? Journal of econometrics, 113(2), 363–398.
Henderson, D. J., Qian, J., & Wang, L. (2015). The inequality–growth plateau. Economics Letters, 128(1), 17–20.
Hsing, Y., & Smyth, D. J. (1994). Kuznets’s inverted-U hypothesis revisited. Applied Economics Letters, 1(7), 111–113.
Huang, H. C. R. (2004). A flexible nonlinear inference to the Kuznets hypothesis. Economics Letters, 84(2), 289–296.
Huang, H. C., Lin, Y. C., & Yeh, C. C. (2012). An appropriate test of the Kuznets hypothesis. Applied Economics Letters, 19(1), 47–51.
Iradian, M. G. (2005). Inequality, poverty, and growth: Cross-country evidence. International Monetary Fund.
Jacobsen, P. W., & Giles, D. E. (1998). Income distribution in the United States: Kuznets’ inverted-U hypothesis and data non-stationarity. Journal of International Trade and Economic Development, 7(4), 405–423.
Kim, D. H., Huang, H. C., & Lin, S. C. (2011). Kuznets hypothesis in a panel of states. Contemporary Economic Policy, 29(2), 250–260.
Kuznets, S. (1955). Economic growth and income inequality. The American Economic Review, 45(1), 1–28.
Lessmann, C. (2014). Spatial inequality and development—Is there an inverted-U relationship? Journal of Development Economics, 106, 35–51.
Li, H., & Zou, H. F. (1998). Income inequality is not harmful for growth: Theory and evidence. Review of Development Economics, 2(3), 318–334.
Lin, S. C. (2007). Semiparametric Bayesian inference of the Kuznets hypothesis. Journal of Development Economics, 83(2), 491–505.
Lin, S. C., Suen, Y. B., & Yeh, C. C. (2007). A quantile inference of the Kuznets hypothesis. Economic Modelling, 24(4), 559–570.
Lin, S. C., & Weng, H. W. (2006). A semi-parametric partially linear investigation of the Kuznets’ hypothesis. Journal of Comparative Economics, 34(3), 634–647.
Majumdar, S., & Partridge, M. D. (2009). Impact of economic growth on income inequality: A regional perspective. In 2009 Annual Meeting, July 26–28, 2009, Milwaukee, Wisconsin (No. 49270). Agricultural and Applied Economics Association.
McElroy, T., & Politis, D. N. (2007). Computer-intensive rate estimation, diverging statistics, and scanning. The Annals of Statistics, 35, 1827–1848.
Muinelo-Gallo, L., & Roca-Sagalés, O. (2013). Joint determinants of fiscal policy, income inequality and economic growth. Economic Modelling, 30, 814–824.
Nahum, R. A. (2005). Income inequality and growth: a panel study of Swedish counties 1960–2000. Department of Economics, Uppsala University.
Nielsen, F., & Alderson, A. S. (1997). The Kuznets curve and the great U-turn: Income inequality in US counties, 1970 to 1990. American Sociological Review, 62(1), 12–33.
Ogus Binatli, A. (2012). Growth and income inequality: A comparative analysis. Economics Research International, 12(2), 1–7.
Patriarca, F., & Vona, F. (2013). Structural change and income distribution: An inverted-U relationship. Journal of Economic Dynamics and Control, 37(8), 1641–1658.
Partridge, M. D. (1997). Is inequality harmful for growth? Comment. The American Economic Review, 87(5), 1019–1032.
Persson, T., & Tabellini, G. (1994). Is inequality harmful for growth? The American Economic Review, 84(3), 600–621.
Pesaran, M. H., Shin, Y., & Smith, R. P. (1999). Pooled mean group estimation of dynamic heterogeneous panels. Journal of the American Statistical Association, 94(446), 621–634.
Politis, D. N., Romano, J. P., & Wolf, M. (1999). Subsampling. New York: Springer.
Ram, R. (1991). Kuznets’s inverted-U hypothesis: Evidence from a highly developed country. Southern Economic Journal, 57(4), 1112–1123.
Robinson, S. (1976). A note on the U hypothesis relating income inequality and economic development. The American Economic Review, 66(3), 437–440.
Rubin, A., & Segal, D. (2015). The effects of economic growth on income inequality in the United States. Journal of Macroeconomics, 45, 258–273.
Saari, M. Y., Dietzenbacher, E., & Los, B. (2015). Sources of income growth and inequality across ethnic groups in Malaysia, 1970–2000. World Development, 76, 311–328.
Shin, I. (2012). Income inequality and economic growth. Economic Modelling, 29(5), 2049–2057.
Sukiassyan, G. (2007). Inequality and growth: What does the transition economy data say? Journal of Comparative Economics, 35(1), 35–56.
Theyson, K. C., & Heller, L. R. (2015). Development and income inequality: A new specification of the Kuznets hypothesis. The Journal of Developing Areas, 49(3), 103–118.
Toshiaki, T. (2005). Confronting income inequality in Japan. Cambridge, MA: Cambridge University Press.
Tuominen, E. (2015). Reversal of the Kuznets curve: Study on the inequality-development relation using top income shares data (No. 2015/036). WIDER working paper.
Tuominen, E. (2016a). Changes or levels? Reassessment of the relationship between top-end inequality and growth. Working Papers 1609, University of Tampere, School of Management, Economics.
Tuominen, E. (2016b). Top-end inequality and growth: Empirical evidence. Working Papers 108, University of Tampere, School of Management, Economics.
Voitchovsky, S. (2005). Does the profile of income inequality matter for economic growth? Journal of Economic Growth, 10(3), 273–296.
Wahiba, N. F., & El Weriemmi, M. (2014). The relationship between economic growth and income inequality. International Journal of Economics and Financial Issues, 4(1), 135–143.
Wan, G., Lu, M., & Chen, Z. (2006). The inequality–growth nexus in the short and long run: Empirical evidence from China. Journal of Comparative Economics, 34(4), 654–667.
Weil, D. N. (2005). Accounting for the effect of health on growth. Working paper, Boston University, School of Management.
We would like to thank two anonymous referees for many helpful comments. However, any remaining errors are solely ours.
About this article
Cite this article
Nasr, A.B., Balcilar, M., Akadiri, S.S. et al. Kuznets Curve for the US: A Reconsideration Using Cosummability. Soc Indic Res 142, 827–843 (2019). https://doi.org/10.1007/s11205-018-1940-1
- Income inequality
- Economic growth