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Kuznets curve
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==Explanations== One explanation of such a progression suggests that early in [[economic development|development]], investment opportunities for those who have money multiply, while an influx of cheap rural labor to the cities holds down wages. Whereas in mature economies, [[human capital]] accrual (an estimate of income that has been achieved but not yet consumed) takes the place of physical capital accrual as the main source of growth; and inequality slows growth by lowering education levels because poorer, disadvantaged people lack finance for their education in imperfect credit-markets. The Kuznets curve implies that as a [[nation]] undergoes [[industrialization]] β and especially the mechanization of agriculture β the center of the nation's economy will shift to the cities. As [[internal migration]] by farmers looking for better-paying jobs in urban hubs causes a significant rural-urban inequality gap (the owners of firms would be profiting, while laborers from those industries would see their incomes rise at a much slower rate and agricultural workers would possibly see their incomes decrease), rural populations decrease as urban populations increase. Inequality is then expected to decrease when a certain level of average income is reached and the processes of industrialization β [[democratization]] and the rise of the [[welfare state]] β allow for the benefits from rapid [[Economic growth|growth]], and increase the per-capita income. Kuznets believed that inequality would follow an inverted "U" shape as it rises and then falls again with the increase of income per-capita.<ref name="Galbraith 587β607">{{cite journal|last=Galbraith|first=James|title=Global inequality and global macroeconomics|journal=Journal of Policy Modeling|date=2007|volume=29|issue=4|pages=587β607|doi=10.1016/j.jpolmod.2007.05.008|citeseerx=10.1.1.454.8135}}</ref> Kuznets had two similar explanations for this historical phenomenon: # workers migrated from agriculture to industry; and # rural workers moved to urban jobs. In both explanations, inequality will decrease after 50% of the shift force switches over to the higher paying sector.<ref name="Kuznets, Simon 1955"/> An explanation of the Kuznets curve is the prevention of social unrest and revolutions by the political elites in favor of democratization with economic and political redistribution.<ref>{{cite journal | url=https://doi.org/10.1162/003355300555042 | doi=10.1162/003355300555042 | title=Why Did the West Extend the Franchise? Democracy, Inequality, and Growth in Historical Perspective | date=2000 | last1=Acemoglu | first1=D. | last2=Robinson | first2=J. A. | journal=The Quarterly Journal of Economics | volume=115 | issue=4 | pages=1167β1199 }}</ref>
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