Kuznets Curve Income Inequality

Nets curve and the great u turn.

Kuznets curve income inequality. It lowers the growth rate in poor countries and increases it in rich ones. It is driven like the first by technological progress inter sectoral reallocation of. 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. 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.

Kuznets 1953 1955 1965 noted that income in equality has an inverted u shaped relation ship with economic development. These estimations of historical income inequality indicate that the gini was around 51 52 for the uk in 1801. Barro 1999 has recently showed that a greater inequality can have a di erential impact according to the nation s income. Criticism kuznets curve has not survived without its share of critics.

Due to limitations of data he used an inequality measure of the ratio of income share of the richest 20 per cent of the population to the bottom 60 per cent of the population known as kuznets ratio. Current day income inequality in the uk is again around 51 52 as measured by. Iv inequality and development. This paper from 1955 his of historical importance in the study of inequality.

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. Looking at annual income levels over the course of roughly 50 75 years kuznets finds that beginning in as early as the nineteen twenties the inequality of income distribution in the uk us and germany narrowed rather than widened. This column suggests that the current upswing in inequality can be viewed as a second kuznets curve. The graph shows income inequality following the curve first increasing before decreasing after hitting a peak as per capita income increases over the course of economic development.

Kui wai li in redefining capitalism in global economic development 2017. Simon kuznets put forward the hypothesis that relationship between per capita national income and the degree of inequality in income distribution may be of the form of inverted u.