The Economic Development‐Income Inequality Nexus

A bstract . The empirical status of Kuznets' U‐curve hypothesis is reassessed using three indicators of development ; two of which incorporate Basic Human Needs performance yardsticks, and three measures of income inequality. To eliminate the potential bias of the results due to functional form misspecification, a quadratic Box‐Cox model of income inequality is specified. When the full sample of developed and developing countries was considered, all the share equations provided strong support for the hypothesis whereas the Gini equations provided weak support irrespective of the measure of development used. The results for the sub sample of developing countries were generally similar to those for the full sample. The policy implications of these results are discussed.