Technical Report Heterogeneous Structural Transformation and Growth Incidence across the Income Distribution: the Kuznets Curve Revisited

Paul, Saumik

2016-04 , Institute of Economic Research, Hitotsubashi University
In 1955, in an influential study Kuznets (1955) predicted an inverted-U relationship between development and inequality, mainly through structural transformation. Since then a large body of research has empirically tested the Kuznets hypothesis, but consensus is far less evident. In this paper, I argue that a heterogeneous process of structural transformation across the income distribution may explain such empirical irregularities. I specifically link the heterogeneity in growth incidence resulting from a shrinking agriculture sector across income quantiles to inequality measures. Empirical evidence drawn from the Cote d’Ivoire household survey data supports this theoretical prediction. However, the decomposition results indicate a relatively small contribution of structural transformation to total changes in inequality.

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