Urbanization And Inequality In Urbanizing Countries: Testing The Shape Of Kuznets Curve

Abstract

The objective of my paper is to investigate the effect of urban growth on inequality. Focusing on the data of countries urbanizing at rate more than 70 percent; the paper looks into the determinants of inequality and that to what extent the changes in the past inequality can be explained by urbanization and GDP per capita. Furthermore, it looks into the mere factors of increased inequality linked to the inflation deflator, education and trade and that what will be the shape of Kuznets curve of inequality and urbanization holding GDP per capita constant and vice versa. The study used Pooled data for the period of 1980-2017 to test the hypothesis of these countries. The pooled ordinary least square (POLS) estimation technique is used to estimate the pooled data model for a dataset of 53 urbanizing countries. Data used in the study have been collected from various sources i.e. World Bank Indicators, World Inequality data. Gini coefficient has been used as a proxy variable of inequality, higher the value Gini coefficient shows higher the inequality in relation to urbanization at first phase and vice versa. Empirical findings shows that Gini coefficient is increasing by 4.05 with 1 unit increase in urban growth. Further, that the Kuznets inverted U shaped curve holds. The sign between Gini coefficient and urban growth is positive and it is significant. The other variables also have the same expected signs as supported by the theory.