According to the kuznets curve, inequality in capitalist societies. The kuznets curve hypothesis has been one of the most debated issues in development economics since the mid1950s. Economic growth and income inequality simon kuznets the. The theory put forward by simon kuznet in 1955 kuznet, 1955 argued that as a country develops, the relationship between economic growth and economic inequality within its population will form an inverted u shape.
The kuznets curve is concave down and skewed to the right. The hypothesis was first advanced by economist simon kuznets in the 1950s and 1960s. The environmental kuznets curve 5 good for the environment. James van alstine and eric neumayer the environmental. The relationship between income inequality and economic development has popularly been characterized by the kuznets invertedu curve kuznets, 1955, which argued that income inequality tends to increase at an initial stage of development and then decrease as the economy develops. The impact of tourism on income inequality in developing. This paper presents a critical history of the environmental kuznets curve ekc. In 1954, us economist simon kuznets presented a conjecture about how inequality in market economies evolves. From a very simplistic viewpoint, it can suggest that economic growth is good for the environment. Kuznets 1955 suggested that income inequality was generally rising in the early stages of economic development.
Within countries, we find evidence of an inverted ushape curve for human capital inequality over time, namely a kuznets curve for human capital. Cohort size, kuznets curves, and openness by matthew higgins federal reserve bank of new york and jeffrey g. This paper presents a new dataset on educational attainment primary, secondary and tertiary schooling at the world level since thus, this progression of environmental cleanup occurring in conjunction with economic growth cannot be replicated indefinitely because there may be. A fundamental issue facing the global economy is the widening poverty gap between the developed and less developed world, and the widening distribution of income within countries and geographical regions. Inequality, poverty and the kuznets curve in spain, 18502000. Mpra paper from university library of munich, germany. An empirical investigation of income inequality in china 19782011, discussion paper 1214, department of economics. In fact, kuznets himself emphasized the fragility of his data among other caveats in his paper.
There is a literature verifying the existence of both an inverted ucurve relating income inequality with economic growth and the mechanism for economic growth evolution proposed by kuznets. Stern rensselaer polytechnic institute, troy, ny, usa available online summary. In the latter phases of the development process, inequality declines, he argued, and this hypothesis of an invertedu relationship between inequality and development has since been known as the kuznets curve. China a country example of the kuznets curve in the making. Feb 14, 20 observed by simon kuznets in 1955, the kuznets curve predicts that inequality within a country will follow a determined path as it develops. Thus the relationship between income distribution and income level can be described by an inverted u curve. Economic inequality is positively and significantly related to rates of homicide despite an extensive list of conceptually relevant controls. This paper departs from previous work by considering a possible nonlinear relationship between trade openness and inequality. Mar 12, 2019 in wealthy countries, growth is slower, and pollution reduction efforts can overcome the scale effect.
Jun 29, 2012 within countries, we find evidence of an inverted ushape curve for human capital inequality over time, namely a kuznets curve for human capital. Democrati zation leads to institutional changes which encourage redistribution and reduce inequality. These estimations of historical income inequality indicate that the gini was around 51, 52 for the uk in 1801. Does economic development require more income inequality. The curvature is also entirely dependent on using a logarithmic scale for income. As the economy keeps growing, inequality will initially increase, then level out before decreasing.
Further, the longrun elasticities on squared tourism revenue confirm the existence of kuznets curve hypothesis between tourism revenue and income inequalities, meaning that if the current level of tourism becomes double then it will significantly reduce the income inequality in developing economies. The kuznets curve, formulated by simon kuznets in the mid1950s, argues that in preindustrial societies, almost everybody is equally poor so inequality is low. In a seminal paper, kuznets 1955 argued that as countries developed, income inequality. It also studies other factors that may contribute to the observed inequality pattern. Introduction the environmental kuznets curve is a hypothesized relationship between various indicators of environmental degradation and income per capita. Furthermore, it was suggested that this global kuznets curve of. Numerous studies have examined the relationship between income inequality and trade openness. Gdp and population data 19692007 from 36 nations and regions, comprising the entire global economy and population, demonstrate a global. The primary argument of critics of kuznets hypothesis and its resulting graphical representation is based on the countries used in kuznets data set.
The ekc is an essentially empirical phenomenon, but most of the ekc literature is econometrically weak. Analyzing the relationship between income inequality and. The third section presents the econometric model adopted to explain this rise inequality. The empirical validity of this kuznets curve has been intensively inves. None of this research tested kuznets hypothesis directly. Through decades of trial and error, economist and researchers realize the mechanics of development as intertwined with growth, inequality, and poverty. Mar 14, 2014 whether the chinese government can change their attitude towards inequality and economic development is bound to have a considerable effect on whether china can reduce inequality and undergo the second half of the kuznets curve. More broadly, though, whether the kuznets curve should really be a u, an n, or even an m, it doesnt advocate a handsoff approach to inequality.
The environmental kuznets curve ekc hypothesis postulates an invertedushaped relationship between different pollutants and per capita income, i. Pdf the kuznets curve and the inequality process researchgate. Inequality, poverty and the kuznets curve in spain, 1850. Introduction the environmental kuznets curve ekc is a hypothesized relationship between various indicators of environmental degradation and income per capita. The ushaped pattern shows up strongly in a nonparametric trend, in stochastic kernel estimation, but weakly in a quadratic fixed effect trend. Wars increased inequality but had nonpermanent effects, while progressive taxation had no impact until 1980, at odds with atkinson, piketty, saez and associates findings. Observed by simon kuznets in 1955, the kuznets curve predicts that inequality within a country will follow a determined path as it develops. Kuznets curve, income inequality in china, theil index, urbanisation, dualism jel classification numbers.
For instance, many envirnnementale the middle income countries used in kuznets data set were in latin america, a region with historically high levels of inequality. The term typically refers to inequality among individuals and groups within a society, but can also refer to inequality among countries. The effect of real per capita gross domestic product gdp on inequality involved the wellknown inverseushaped relation known as the kuznets curve. The issue of economic inequality is related to the ideas. The goal of this paper is to apply the theory of the political kuznets curve to russia and reveal the key determinants. There is no room for increased inequality because kuznets. According to the kuznetss ucurve theory, urbanization increases inequality in developing countries during the first phase of industrialization. The kuznets curve is the graph of income inequality ordinate variable against the movement of workers from rural subsistence agriculture into more modern sectors of the economy abscissa. Finally, a conclusive paragraph highlights the need for further research and the contribution this paper makes to the ongoing debate on inequality.
O15, o53 this paper is an extension of our earlier paper entitled understanding the kuznets process. The gini concentration ratio is the preferred measure of income inequality in economics. China a country example of the kuznets curve in the. Income inequality and the environmental kuznets curve. Starting from a low value, an increase in per capita gdp tended to raise inequality. Within countries, we find evidence of an inverted ushape curve for human capital inequality, namely a kuznets curve of education. Wars increased inequality but had nonpermanent effects, while progressive taxation had no impact until 1980, at odds with. At the global level, they also find that human capital inequality has increased from 1870 to approximatively 1970, then has decreased. When plotted against average years of schooling, human capital inequality within countries has clearly followed an inverted ushape curve, namely a kuznets curve of education.
Four economists, mauro gallegati, steven keen, thomas lux, and paul ormerod, published a paper after the 2005 econophysics colloquium criticizing conservative particle systems as models of income and wealth distribution. Explaining the invertedu shape of the kuznets curve kuznets original hypothesis of an invertedu relationship between inequality and developed was formed on the basis of the statistical regularities he observed from historical economic data of england, germany and the united states kuznets, 1955. It would seem that he was reasonably correct as well. The kuznets hypothesis suggests that inequality is low at a lower income level but later increases at higher income level with economic growth. Carson per capita income pollution 0 0 10 20 30 40 50 20000 40000 60000 80000 00 figure 1 stylized environmental kuznets curve. The impact of migration on inequality is explored by kuznets 1955 in his aer article economic growth and income inequality, which forms a basis for kuznetss inverted ucurve theory. The rise and fall of the environmental kuznets curve. Sep 27, 2009 4197 the kuznets curve and inequality 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 fact that this relationship is found with the most recent data and using a different measure of economic inequality from previous research, suggests that the finding is very robust. Trade liberalization through the removal of tariff and nontariff barriers gears up the process of structural transformation and at the same time changes the income and wealth distribution of an economy. Introduction the relationship between income disparity and economic growth has been a critical issue in macroeconomics over several decades. Analyzing the relationship between income inequality and economic growth. Current day income inequality in the uk is again around 51, 52 as measured by. In this regard, beckerman 1992 represents an early in.
Apr 10, 2019 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 ushape of the kuznets curve. The ekc is named for kuznets 1955 who hypothesized income inequality first rises and then falls as economic development proceeds. Kuznets 1 postulated that this relationship between economic development and income inequality was produced by the combined effects of urbanization and industrialization and was associated with the movement of labor from. Apr 26, 2019 le volume courbe french for the volume curve is a band by frenchborn, londonbased singersongwriter, charlotte marionneaucharlotte courbe. Income inequality, kuznets curve, inequality panel data. This curve is meant to illustrate economist simon kuznets. In a nutshell, the hypothesis simply states that income inequality should follow an inverseu shape along the development process. How urbanization affects the inequality in developing countries. View merits and limitations of kuznets curve research papers on academia. At low levels of income, countries may exhibit traditional industries such as subsistence farming which generates low levels of inequality. In his article, kuznets shows how demographic changes followed by industrialization alter income distribution within a country. Some empirical evidence showed that the level of environmental degradation and per capita income follow an inverted ushaped pattern, just as income inequality and per capita income in the original kuznets curve. Overall, our theory of the kuznets curve is that capitalist industrialization tends to increase inequality, but this inequality contains the seeds of its own destruction. The rise and fall of the environmental kuznets curve david i.
The kuznets curve and the inequality process munich. Grossman and krueger 1995 and the world bank 1992 first popularized this idea, using a simple empirical approach. Le volume courbe french for the volume curve is a band by frenchborn, londonbased singersongwriter, charlotte marionneaucharlotte courbe. Noting increasing economic equality in three developed nations and using a theoretical economic model, kuznets hypothesized that economic development was associated with initial increasing economic inequality followed by decreasing economic inequality. Stern department of economics, rensselaer polytechnic institute, troy, ny 12180, usa june 2003 1. The kuznets curve and inequality adam smith institute. Kuznets curve has not survived without its share of critics. An altemative hypothesis to country income inequality. Thus the relationship between income distribution and income level can be described by an inverted ucurve. Income inequality and the environmental kuznets curve simone borghesi nota di lavoro 83. 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 invertedu. For instance, many envirnnementale the middle income countries used in kuznets data set were in latin america, a.
How urbanization affects the inequality in developing. Merits and limitations of kuznets curve research papers. Because of coubre, dobson and ramlogan suggest that perhaps trade openness can be related to inequality through a kuznets curve framework. Kuznets curves stratified by mean per capita income, 1969. Kuznets theory was tested over several decades after his article was published. The environmental kuznets curve suggests that economic development initially leads to a deterioration in the environment, but after a certain level of economic growth, a society begins to improve its relationship with the environment and levels of environmental degradation reduces. What the kuznets curve suggests is that the greater income inequality associated with rising income per capita prior to reaching the threshold level of income is necessary if the threshold level of income is ever to be reached, after which income inequality will be reduced through additional economic growth. The east asian miracle has been used to criticize the validity of the kuznets curve theory. Kuznets 1 suggested that this curve was produced by the combined effects of urbanization and industrialization and resulted from the movement of the labor force from lower paying rural agricultural jobs to higher. Inequality and development across and within countries. Friday, april 22, as internal migration by farmers.
This is the evidence, such as it is, that the kuznets curve exists. Kuznets inverted uhypothesis on income inequality economics. A quadratic fit is significantly concave, although most of the curvature comes from the low inequality levels at high incomes rather than low inequality at low incomes. Inequality and growth revisited asian development bank. This paper shows that the iconic kuznets curve can be derived from the inequality process ip, a conservative particle system, presenting a counterexample to gallegati et al. Pdf on feb 2, 2017, joanna muszynska and others published kuznets hypothesis of income inequality. At the global level, the world inequality in human capital has followed a similar trajectory, first increasing from 1870 to 1970, then decreasing.
Economic inequality or wealth and income differences comprises all disparities in the distribution of economic assets and income. The hypothesis states that at very low levels of income, income inequality must also be low, as practically everybody lives at, or close to, subsistence level. Using population and gdp data from 1969 through 2007 from 36 nations and regions that comprised the entire global economy, a global. While the re sults will be able to comment on the presence or absence of the kuznets curve, they will be more descriptive than a simple test of that hypothesis. 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 it would seem that he was reasonably correct as well. The kuznets curve is the graph of income inequality ordinate variable against the movement of workers from rural subsistence agriculture into more modern. Kuznets curve this paper presents a new dataset on educational attainment primary, secondary and tertiary schooling at the world level since thus, this progression of environmental cleanup occurring in conjunction with economic growth cannot be replicated indefinitely because there may be nowhere to export waste and pollutionintensive processes. In the early stages of economic growth degradation and pollution. Economic rather than political forces appear to dominate inequality trends in spain.
The hypothesis states that at very low levels of income, income inequality must also be low, as practically. When development leads to increas ing inequality, this can induce political instability and force democratization on political elites. Much of this literature sought to test the environmental kuznets curve ekc hypothesis, which posits that in the early stages of economic development environmental degradation will increase until a certain level of income is reached known as the turning point and then environmental improvement will occur. If you have authored this kuznrts and are not yet registered with repec, we encourage you to do it here. Mar 30, 2018 how might inequality be affected by income growth. Williamson harvard university june 1999 the authors can be reached at the following email addresses. The paper provides a political economy theory of the kuznets curve.
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