This study reexamines the nonlinear relationship between prosperity and income inequality in member countries of the Association of Southeast Asian Nations during 1990–2023 and assesses how the rule of law shapes the sensitivity of inequality to economic growth. Using an instrumental variable strategy based on external trade shocks, the study addresses endogeneity and identifies the causal component of the growth–inequality relationship. The results indicate that most countries in the region lie on the left-hand side of the inverted U-shaped Kuznets curve, suggesting that they remain in a transitional stage of development. The findings further show that the interaction between economic growth and the rule of law is context dependent: Weaker legal environments are associated with steeper inequality responses to growth, while stronger legal institutions are linked to a flatter and more stable growth–inequality relationship. Market inequality is more sensitive to the inclusion of Singapore, whereas post-redistribution inequality remains substantially more stable across specifications.
HARDINANDAR et al. (Tue,) studied this question.