Development and distribution: A critique of the cross-country U-hypothesis |
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Authors: | Ashwani Saith |
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Affiliation: | Institute of Social Studies, 2597 JR The Hague, The Netherlands |
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Abstract: | This paper questions the validity of a modern paradigm, viz., the U-Hypothesis. It argues that notwithstanding contrary claims, the recent cross-country econometric studies by Ahluwalia and others have little in common from a methodological point of view with Kuznets' earlier intertemporal national studies. Ahluwalia's cross-country U-Curve is found to be based on defective statistics and questionable methodological premises. In specific, the estimation of one U-Curve from observations on both LDCs and DCs is criticised. A sample restricted to the LDC group considerably weakens support for the U-Hypothesis. Further, even marginal variations in the data set lead to the virtual disappearance of Ahluwalia's empirical relationship. The paper concludes that the cross-country U-Hypothesis is more of a hindrance than an aid to our comprehension of the relationship between economic growth and income distribution. |
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