The income inequality curve in the last 100 years: what happened to the Inverted-U?

What is it about?

This paper examines the shape of the curve that represents the long-run relationship between income inequality and economic growth, using data from four developed countries (USA, UK, France, and Germany) over the period 1915 – 2014.

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Why is it important?

In contrast to most previous studies, we will, first, not use the Gini index as a measure of inequality, but the top 10% income share instead, because the data related to this indicator (Gini) are for very short periods of time. Second, most of the studies that looked at the shape of the curve were based on limited data. In our study, however, we relied on panel data in four developed countries over the period 1915 – 2014 (100 years). Our results confirm that the Kuznets curve no longer explains the path of inequality. The rise and fall of inequality are not what we have seen in the last 100 years.