When talking about inequality of income distributions within the society, it is inevitable to talk about how it relates to the process of economic development. About more than half a century ago, Simon Kuznets made his hypothesis on the relationship of the two and it was presented as an inverted U-shape curve—the Kuznets Curve. The pattern of the inverted U-shape intuitively indicates the timing characteristic that the inequality increases in the initial stages of development then decreases at the higher level of development. Later on the stylised fact has been formalised by numerous of studies that proving its validity and implicating in modern societies. Certainly there would be some skeptical opinions as the conjecture was based on scanty data, but the reasoning model Kuznuts built is considering an empirical regularity.
This paper forwards will examine the reasons of the pattern of the Kuznets curve by conducting Kuzenets’ (1955) explanation: in the period of economy rapidly growing, there would be a sharp difference arising between the poor and the rich which gives the incentive to the industrial productivity and eventually drive the economy to a higher level. When an economy is settled on a relative high level of development, it is clearly that most portion of population live with a relative high standard of life, or more precisely with higher incomes, briefly, the inequality should be decreasing at this stage. The next will present the empirical evidence that contribute to the formalisation of Kuznuts’ conjecture. And as well as some other factors that facilitate the relationship such as the policy structure. Afterwards, it will discuss the validity of the conjecture in more recent cases such as of which the paths of ine...
... middle of paper ...
...he Political Economy of the Kuznets Curve, Review of Development Economics, Harvard University, 6(2), Pp. 183-203
Aluwahlia, M. S. (1976) Income Distribution and Development, American Economic Review, vol. 66, issue 2, Pp. 128-35
Banerjee, A., Duflo, E. (2003), Inequality and Growth: What Can the Data Say?, Journal of Economic Growth, 8(3), Pp. 267-299
Barro, R. J. (2000) Inequality and Growth in a Panel of Countries, Journal of Economic Growth, 5:5-32
Forbes, K. J. (2000) A Reassessment of the Relationship between Inequality and Growth, The American Economic Review, Vol. 90, No. 4, Pp. 869-887
Kuznets, S. (1955) Economic Growth and Income Inequality, American Economic Review, Vol. 45, No. 1, Pp. 1-28
Piketty, T. (2006) Kuznets Curve: Yesterday and Tomorrow, edited by Banerjee, A., Bénabou, R., and Mookherjee, D., Understanding Poverty, Oxford University Press.
Stone, Chad, Danilo Trisi, Arloc Sherman, and William Chen. "Center on Budget and Policy Priorities." A Guide to Statistics on Historical Trends in Income Inequality. Center on Budget and Policy Priorities, 6 Nov. 2013. Web. 03 Dec. 2013. .
“A Guide to Statistics on Historical Trends in Income Inequality.” cbpp.org. Center on Budget and Policy Priorities, 2013. Web. 06 April. 2014. .
Throughout the years, “ U.S income inequality has been increasing steadily since the 1970s and now has reached levels not seen since 1928” (Source A).
The Economist. “Inequality and the American Dream”. They Say I Say. Gerald Graff, Cathy Birkenstein, Russel Durst. New York: W.W. Norton & Company, 2009. Print.
Kim, Jim Yong et al. (2000). Dying for Growth: Global Inequality and the Health of the Poor. Cambridge: Common Courage Press.
Fletcher, Michael. “Income Inequality Hurts Economic Growth, The Washington Post. N.p., 24 Jan. 2010. Web. 29 Apr. 2014.
Income inequality in the United States has increased and decreased throughout history, but in the recent years, the widening gap has become a serious issue. Income inequality is usually measured by Gini coefficient. According to this method coefficient varies between 0 and 100; while 0 represents complete equality (income is distributed equally among all the population of the country), 100 represents complete inequality (only one person receives all the country’s income, while the rest of the population receives nothing). According to the Census of Bureau, the official Gini coefficient in the U.S. was 46.9 in 2010. This is way higher than the all-time low coefficient of 38.6 set in 1968 (qtd. in Babones).
Income inequality in the United States, as of 2007, has reached levels not seen since 1928. In 1928, the top one percent received nearly 24% of all income within the United States (Volscho & Kelly, 2012). This percentage fell to nearly nine percent in 1975, but has risen to 23.5% as of 2007 (Volscho & Kelly, 2012). Meanwhile, in 2007 (see
...sterlin, Richard A. "Does Economic Growth Improve the Human Lot?". Nations and Households in Economic Growth:
Bob, Friedman. "Wealth Inequality: Its Causes and Cures." CFED The Inclusive Economy Blog. CFED, 19 Mar. 2013. Web. 21 Apr. 2014.
Pettinger, Tejvan. The “Pros and Cons of Inequality.” Economics Help. 18 Oct. 2011. Web.
Hart Research Associates, 2010. Reich, Robert. “Why the Rich Are Getting Richer and the Poor Poorer.” The Work of Nations.
Inc. Rostow, Walt W. 1960.. The Stages of Economic Growth: A Non-Communist Manifesto. Cambridge: Cambridge University Press, 1998. Darwin, John.
"Growing Income Inequality and the Education Gap." Economist's View. N.p., 8 May 2006. Web. 12 Dec. 2013.
Stewart, Charles T., Jr. "Inequality of Wealth and Income in a Technologically Advanced Society." The Journal of Social, Political, and Economic Studies 27.4 (2002): 495-512. Print.