Inequality and development: reviewing the Kuznets hypothesis after reducing inequality in Brazilian municipalities

Abstract

Considering the Kuznets Curve, we investigated the relationship between income and income inequality in Brazilian municipalities. For that, we use data from 1991, 2000 and 2010 and estimators that accommodate the uneven spacing between those years. Other important contributions of this work are: the use of different measures of inequality and the implementation of different econometric specifications, including the fourth degree polynomial that is more flexible than the usual functional forms. The initial results indicate that there is evidence in favor of the Kuznets Curve for the Gini and L indices of Theil, but such evidence disappears when using the fourth-degree polynomial model. For other measures of inequality - ratios between the income of the richest and the poorest - there is no evidence in favor of the Kuznets Curve hypothesis. Therefore, in general, the evidence is not favorable to the Kuznets Curve.