RELATIONSHIP BETWEEN INCOME DISTRIBUTION AND ECONOMIC DEVELOPMENT (KUZNET’S HYPOTHESIS): ANALYSIS OF PANEL SMOOTH TRANSİTİON REGRESSION (PSTR)

Abstract

According to Kuznet's Hypothesis, Until a certain level the relationship between income level and income distribution is positive. After the threshold level, relationship between two variables becomes negative. The relationship between variables are shown as inverted U. In this work, we analyzed the relationship between the growth data of years from 1990 to 2016 belonging to 14 countries and GINI factor that shows income inequality distribution by using PSTR ( Panel Smooth Transition Regression) method. Eventually we obtained similar results to Kuznets (1956) hypothesis. Income distribution per capita in given countries until level of 12.025 $ is more unequal, after this turning point is exceeded, it was concluded that there is less unequal income distribution.