The Economic growth and income inequality

Verification of the Kuznets curve for socialist Asian countries

Abstract

In recent years the problem of economic inequalities has become one of the most often discussed problems in economics. Even though from neoclassical perspective inequalities should not have negative impact on economy, still the relation between inequalities and economic growth is not obvious. Traditionally, the starting point in this discussion is Simon Kuznets concept, according to which inequality rises in the early phases of economic development and decreases as the growth takes place. The empirical verification of this concept has been investigated, but the evidence is ambiguous. In this context, re-examining Kuznets theory for socialist countries in Asian (i.e. China, Vietnam and Lao) is especially interesting because of the rapid economic growth yet still keeping authoritarian regime. Therefore the main aim of the study is to verify the relation between economic growth and income inequality in China, Lao and Vietnam in years 1990–2022 and assess whether the relation takes shape of so-called Kuznets curve. In order to achieve the goal the data analysis and basic econometric methods are used. The results generally support relations indicated by Kuznets except for Lao for which obtained result were not statistically significant. The findings keep the door open to further analyses aimed at the identification and exploration of more significant determinants that could conclusively verify the relation between inequalities and economic development. Most promising would be incorporating some institutional determinants as it was proposed in Acemoglu and Robinson works.