The evolution of the Kuznets curve in Canada

Abstract

Since its original formulation, various extensions of the Kuznets hypothesis have been proposed. In this paper, we make use of a unique panel dataset of Canadian regions to test whether inter-personal income inequality increases once the initial inverted-U pattern is completed. Our results support the notion of a sideways S-shaped curve describing a wavelike decrease to increase shift, with a turning point in the late-1990s/early-2000s where inter-personal inequality across regions “bottoms out” before alternating to an upward-sloping trajectory. While there are many factors associated with this reversal of trends, we find evidence that a region's size plays a role in explaining the more recent rise in inequality.