Abstract:

This study aims to determine effects of economic growth on income inequality by classifiying countries in terms of their level of development. The validity of Kuznets’s inverted-U shaped hypothesis is tested for four different panels that is divided as low and low-middle income countries, upper-middle income countries, high income countries and all countries. This paper examines that the relationship between economic growth and income inequality by using data for the period of 1995-2011 and 94 countries. The evidences support Kuznets’s hypothesis. Income inequality decreases with economic growth in high income countries, while it increases in low and low-middle income and upper-middle income countries. The results indicate that economic growth should be supported by the policies reducing income inequality.

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