This paper uses a new comprehensive cross-state panel for the United States over the 1945–2004 period to reassess the relationship between income inequality and economic development. By employing the pooled mean group estimator of Pesaran, Shin, and Smith (1999), it detects a long-run cointegrating association between inequality and development (as well as its squared term). Moreover, their relationship is better characterized by a U shape rather than the inverted-U profile asserted by Kuznets (1955). The evidence is robust to a variety of sensitivity tests. (JEL C14, C21, O11, O15)
