Dynamics of Income Inequality under Social Identity Hypothesis
The predicted long-term inequality, led by Kuznets (1955), can be eventually reduced
because of higher level of economic development. However, Piketty (2014) pointed out that
more inequality is likely to occur instead. He also argued that share of income and wealth
of the rich in the top income levels tend to be higher than a generation ago. This study,
using the idea of social identity and redistribution introduced by Shayo (2009) and Lindqvist
and Ostling (2013), investigates the dynamics of inequality in Thailand for three different
periods: the early Rattanakosin prior to Bowring Treaty, the period during the reign of King
Rama the fifth, and the current period. The results indicated that dynamics of income
inequality in Thailand is consistent with the modified Kuznets curve. Multiple equilibria
are also possible as suggested by Acemoglu and Robinson (2000, 2002), and some
redistributive equilibria are sub-optimal.
Keywords: Kuznets curve, social identity, redistribution, multiple equilibria. median voters.
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