Editing Kuznets curve (section)

===The Kuznets curve and development economics===

Critics of the Kuznets curve theory argue that its U-shape comes not from progression in the development of individual countries, but rather from historical differences between countries. For instance, many of the middle income countries used in Kuznets' data set were in [[Latin America]], a region with historically high levels of inequality. When controlling for this variable, the U-shape of the curve tends to disappear (e.g. Deininger and [[Lyn Squire|Squire]], 1998). Regarding the empirical evidence, based on large panels of countries or time series approaches, Fields (2001) considers the Kuznets hypothesis refuted.<ref>{{cite book |author=Fields G |year=2001 |title=Distribution and Development, A New Look at the Developing World |publisher=Russel Sage Foundation, New York, and The MIT Press, Cambridge, Massachusetts, and London}}</ref>

The East Asian miracle (EAM) has been used to criticize the validity of the Kuznets curve theory. The rapid economic growth of eight East Asian countries—Japan; the [[Four Asian Tigers]] South Korea, Taiwan, Singapore, Hong Kong; Indonesia, Thailand, and Malaysia—between 1965 and 1990, was called the East Asian miracle. The EAM defies the Kuznets curve, which insists growth produces inequality, and that inequality is a necessity for overall growth.<ref name="Galbraith 587–607" /><ref name="Stiglitz 1996 151–177" /> Manufacturing and export grew quickly and powerfully. Yet, contrary to Kuznets' historical examples, the EAM saw continual increases in life expectancy and decreasing rates of severe poverty.<ref>{{cite book|title=(course lectures)}}</ref> Scholars have sought to understand how the EAM saw the benefits of rapid economic growth distributed broadly among the population.<ref name="Stiglitz 1996 151–177">{{cite journal|last=Stiglitz|first=Joseph E.|title=Some Lessons From The East Asian Miracle|journal=The World Bank Research Observer|date=August 1996|volume=11|issue=2|pages=151–177|doi=10.1093/wbro/11.2.151|citeseerx=10.1.1.1017.9460}}</ref> [[Joseph Stiglitz]] explains this by the immediate re-investment of initial benefits into land reform (increasing rural productivity, income, and savings), universal education (providing greater equality and what Stiglitz calls an "intellectual infrastructure" for productivity<ref name="Stiglitz 1996 151–177"/>), and industrial policies that distributed income more equally through high and increasing wages and limited the price increases of commodities. These factors increased the average citizen's ability to consume and invest within the economy, further contributing to economic growth. Stiglitz highlights that the high rates of growth provided the resources to promote equality, which acted as a positive-feedback loop to support the high rates of growth. 

[[Cambridge University]] Lecturer [[Gabriel Palma]] recently found no evidence for a 'Kuznets curve' in inequality:

<blockquote>"[T]he statistical evidence for the 'upwards' side of the 'Inverted-U' between inequality and income per capita seems to have vanished, as many low and low-middle income countries now have a distribution of income similar to that of most middle-income countries (other than those of Latin America and Southern Africa). That is, half of Sub-Saharan Africa and many countries in Asian, including India, China and Vietnam, now have an income distribution similar to that found in North Africa, the Caribbean and the second-tier [[Newly industrialized country|NIC]]s. And this level is also similar to that of half of the first-tier NICs, the Mediterranean [[European Union|EU]] and the Anglophone [[OECD]] (excluding the US). As a result, about 80% of the world population now live in countries with a [[Gini coefficient|Gini]] around 40."<ref name="Palma">{{Cite journal |last=Palma|first=J. G.|date=2011-01-26|title=Homogeneous middles vs. heterogeneous tails, and the end of the 'Inverted-U': the share of the rich is what it's all about|url=https://ideas.repec.org/p/cam/camdae/1111.html |journal=Cambridge Working Papers in Economics |language=en}}</ref></blockquote>

Palma goes on to note that, among middle-income countries, only those in Latin America and Southern Africa live in an inequality league of their own. Instead of a Kuznets curve, he breaks the population into deciles and examines the relationship between their respective incomes and income inequality. Palma then shows that there are two distributional trends taking place in inequality within a country:

<blockquote>"One is 'centrifugal', and takes place at the two tails of the distribution—leading to an increased diversity across countries in the shares appropriated by the top 10 percent and bottom forty percent. The other is 'centripetal', and takes place in the middle—leading to a remarkable uniformity across countries in the share of income going to the half of the population located between deciles 5 to 9."<ref name=Palma /></blockquote>

Therefore, it is the share of the richest 10% of the population that affects the share of the poorest 40% of the population with the middle to upper-middle staying the same across all countries.

In ''[[Capital in the Twenty-First Century]]'', [[Thomas Piketty]] denies the effectiveness of the Kuznets curve. He points out that in some rich countries, the level of income inequality in the 21st century has exceeded that in the second decades of the 20th century, proposing the explanation that when the [[rate of return]] on capital is greater than the rate of [[economic growth]] over the long term, the result is the concentration of wealth.<ref>{{Cite book |author=Thomas Piketty |author-link=Thomas Piketty |title=[[Capital in the Twenty-First Century]] |year=2014 |publisher=[[Belknap Press]] |isbn=978-0674430006}}</ref>