Economics • Economic BasicsEasy
What does the 'Kuznets Curve' hypothesize regarding economic development and income inequality?
A. Inequality decreases steadily as a country transitions from agriculture to industry.
B. Inequality first increases and then decreases as an economy develops.✓ Correct Answer
C. Inequality remains constant throughout all phases of industrial growth.
D. Inequality is independent of per capita income levels.
💡 Solution & Explanation
The Kuznets curve proposes an inverted U-shaped relationship where income inequality initially rises during the early stages of industrial transition before eventually declining as a nation achieves advanced economic maturity. Simple linear assumptions claiming that inequality decreases steadily or remains constant fail to capture the structural labor shifts highlighted in developmental economics. This hypothesis remains a foundational concept for policymakers studying the socio-economic impacts of rapid industrialization and urbanization.
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