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A Modern Theory of Kuznets’ Hypothesis

Maria Sarigiannidou () and Theodore Palivos
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Maria Sarigiannidou: Department of Economics, Texas Christian University

No 201202, Working Papers from Texas Christian University, Department of Economics

Abstract: The Kuznets hypothesis The character of evolution of the distribution of income along an economy’s development process has been a theme with a long history in economic enquiry. The literature starts with the classic contribution of Simon Kuznets (1955), who was the first to identify economic growth as a determinant cause of long term changes in the distribution of income. Establishing his proposition on data from the time of industrialization of currently advanced nations, Kuznets (1955) initiated the idea that the inequality characterizing income distribution exhibits a non-monotonic trend along the process of economic development: it appears to widen during a society’s transition from a pre-industrial to an industrial system, it remains stable for a while and narrows as more mature stages of growth are reached.1This systematic evolution of income distribution along a country’s development path became known as the Kuznets Curve –an inverted U-shape relationship between income per capita and personal income inequality.

Date: 2012-01
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