KUZNETS HYPOTHESIS OF INCOME INEQUALITY: EMPIRICAL EVIDENCE FROM EU

Abstract

The article aims at identification of the determinants of income inequality in the EU countries in the period of 2004-2013. Specifically, we test for the existence of an inverted U-shaped relationship between income inequality and the level of economic development measured by the GDP per capita, as it is predicted by the Kuznets hypothesis. The data come from Eurostat (EU-SILC), International Monetary Fund and World Bank. Our results provide evidence for a U-shaped, rather than the inverted U, relationship. We find that unemployment rate and tertiary education attainment are statistically significantly and positively related to income inequality. Also old-age dependency ratio is significant in the EU15 countries, while a share of self-employed is significant in the new member states.