Income Inequality Kuznets Curve

It lowers the growth rate in poor countries and increases it in rich ones.

Income inequality kuznets curve. Comparing 20 to 20 a completely even distribution is expressed as 1. Kuznets 1953 1955 1965 noted that income in equality has an inverted u shaped relation ship with economic development. The kuznets ratio is a measurement of the ratio of income going to the highest earning households usually defined by the upper 20 to income going to the lowest earning households which is commonly measured by either the lowest 20 or lowest 40 of income. 20 to 40 changes this value to 0 5.

Barro 1999 has recently showed that a greater inequality can have a di erential impact according to the nation s income. This column suggests that the current upswing in inequality can be viewed as a second kuznets curve. Iv inequality and development. It would seem that he was reasonably correct as well.

Current day income inequality in the uk is again around 51 52 as measured by. Simon kuznets predicted that as an economy develops inequality will rise and then at a certain stage of development naturally begin to fall back again. The relationship between income inequality and economic development has popularly been characterized by the kuznets inverted u curve kuznets 1955 which argued that income inequality tends to increase at an initial stage of development and then decrease as the economy develops. In the 1950s and 1960s simon kuznets hypothesized that as an economy develops market forces first increase then decrease the overall economic inequality of the society which is illustrated by the inverted u shape of the kuznets curve.

The two separate literatures on the kuznets curve and the ekc provide an other possible explanation for the environmental impact of inequality. The kuznets curve was widely used to describe the relationship between growth and inequality over the second half of the 20th century but it has fallen out of favour in recent decades. Using data for a handful of industrial societies in the nineteenth and twentieth centuries he showed that income inequality initially in creased with industrial development peaked. These estimations of historical income inequality indicate that the gini was around 51 52 for the uk in 1801.