The Kuznets Curve and Beyond: Growth and Changes in Inequalities

Abstract

The Kuznets curve — an inverse-U shaped relation between income inequality and GNP per capita — plays in development economics a role similar to that of the Phillips curve in modern macroeconomics. Both are 'measurements without a theory' which have forced a reconsideration of entrenched analytical schemes. Their strength lies in bringing neglected variables of critical importance for economic policy-making into sharper focus. The Phillips curve challenges the IS-LM framework, and places the inflation rate at the centre of the macroeconomic stage. The Kuznets curve concerns the size distribution of income and questions the emphasis of formal growth models on factor shares and modern sector output growth.