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An Empirical Verification of Kuznets Hypothesis in India

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Inequality, Poverty and Development in India

Part of the book series: India Studies in Business and Economics ((ISBE))

Abstract

The trajectory of output growth, more precisely economic growth and its interaction with other phenomena of an economy follows a complex path. Among many phenomena the one that has caught the world attention at large scale especially since the work of Piketty and Saez is the “Rising Inequality in Incomes”. Though for some countries like India there was a reduction in the poverty level, there seems no positive bearing on economic growth in improving income distribution for past two decades. In this paper, we have used ARDL cointegration approach to analyze the relationship between income inequality (EHII, from UTIP-UNIDO) and its various determinants from 1964 to 2007. Besides using data on Estimated Household Income Inequality (EHII), we have used income share of top 1% as an alternative measure of inequality. Our results reveal no relevance of Kuznets Hypothesis, instead, the relationship is U-shaped in nature, implying that with the initial rise in GDP per capita inequality decreases, later on as GDP increases, inequality tends to increase. Among the control variables, CPI (price level) is found to be positively and Government expenditure negatively related to inequality, while trade openness showed no significant relationship.

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Authors and Affiliations

  1. School of Economics, University of Hyderabad, Room No. 09, Men’s Hostel NRS NX-E, Hyderabad, 500046, India

    Aadil Ahmad Ganaie

  2. School of Economics, University of Hyderabad, Room no. 233, Men’s Hostel NRS NX-E, Hyderabad, 500046, India

    Sajad Ahmad Bhat

  3. School of Economics, University of Hyderabad, Hyderabad, 500046, India

    Bandi Kamaiah

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  1. Department of Economics, North-Eastern Hill University, Shillong, Megalaya, India

    Utpal Kumar De

  2. Economic Research Unit, Indian Statistical Institute, Kolkata, West Bengal, India

    Manoranjan Pal

  3. Biological Anthropology Unit, Indian Statistical Institute, Kolkata, West Bengal, India

    Premananda Bharati

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Ganaie, A.A., Bhat, S.A., Kamaiah, B. (2017). An Empirical Verification of Kuznets Hypothesis in India. In: De, U., Pal, M., Bharati, P. (eds) Inequality, Poverty and Development in India. India Studies in Business and Economics. Springer, Singapore. https://doi.org/10.1007/978-981-10-6274-2_3

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