Who Was Simon Kuznets?

Simon Kuznets, a Russian-American development economist and statistician, was awarded the 1971 Nobel Memorial Prize in Economics for his research on economic growth. He set the standard for national income accounting, enabling accurate estimates of 澳洲幸运5官方开奖结果体彩网:gross national product to be calculated for the first time.

Understanding Simon Kuznets

Simon Kuznets set the standard for 澳洲幸运5官方开奖结果体彩网:national income accounting, work that was funded by the nonprofit 澳洲幸运5官方开奖结果体彩网:National Bureau of Economic💝 Research. His measures of savings, consumption, and investment helped advance 澳洲幸运5官方开奖结果体彩网:Keynesian economics and the study of econometrics. He also helped lay the foundation for the study of trade cycle♔s, now known as "Kuznets cycles," and developed ideas about the relationship between economic growth and income inequality.

Kuznets was born in Ukraine in 1901, and moved to the U.S. in 1922. He earned his Ph.D. from Columbia University and was a profes﷽sor of economics and statistics at the University of Pennsylvania (1930-54), a professor of political economy at Johns Hopkins (1954-60), and a professor of economics at Harvard (1960-71). He died in 1985 in Cambridge, MA.

Kuznets Curve

Kuznets’ work on economic growth and income distribution led him to hypothesize that industrializing nations experience a rise and subsequent decline in economic inequality. When charted, this trajectory appears as an inverted "U" shape, also known as the “Kuznets curve."

He thought economic inequality wou▨ld increase as rural labor migrated to the cities, keeping wages down as workers competed for jobs. But according to Kuznets, social mobility increases again once a certain level of inc𓆉ome was reached in “modern” industrialized economies, as the welfare state takes hold.

However, since Kuz𒅌nets postulated this theory in the 1970s, income inequality has increased in advanced developed countries, while it has also declined in fast-growing East Asian countr🎀ies.

Environmental Kuznets Curve

A modification of the Kuznets curve has become popular to chart the rise and subsequent decline in pollution levels of developing economies. First developed by Gene Grossman and Alan Krueger in a 1995 NBER paper and later popularized by the World Bank, the environmental Kuznets curve follows the same basic pattern as the original Kuznets curve.

Thus, environmental indicatorsꦍ deteriorate as an economy industrializes until a turning point is reached. The indicators then begin impr♛oving again with the aid of new technology and more money that is funneled back to society to improve the environment.

There is mixed empirical evidence to prove validity of the environmental Kuznets curve. For example, carbon emissions h𝓡ave steadily risen for both developed and developing economies. The development of modern carbon trading infrastructure alsཧo means that developed economies are not actually reducing pollution but exporting it to developing economies, which are also involved in producing goods for them.

That said, certain types of pollutants declined as an economy industrialized. For example, sulphur dioxide levels decreased in the United States with increased regula𓆉tion even as the number of cars on its roads held steady or increased.

Evidence and Criticism of Kuznets Curve

Empirical evidence of Kuznets curve has been mixed. The industrialization of English society followed the curve's hypothesis. The 澳洲幸运5官方开奖结果体彩网:Gini coefficient, a measure of inequality in society, in Englan🌠d rose to 0.627 in🥀 1871 from 0.400 in 1823. By 1901, however, it had fallen to 0.443. The rapidly-industrializing societies of France, Germany, and Sweden also followed a similar trajectory of inequality around the same time.

But Netherlands 💖and Norway had a different experience and inequality dꦯeclined, for the most part, consistently as their societies transitioned from agrarian economies to industrial ones. Some East Asian economies—Japan, South Korea, and Taiwan—also witnessed a constant decline in their inequality numbers during periods of industrialization.

Different theories have been put forward to explain these anomalies. Some ascribe it to cultura🅘l quirks. That explanation, however, does not account for the experiences of Netherlands and Norway in contrast to the rest of Europe.

Others have focused on development of political systems that enabled rapid redistribution of wealth. For example, Daron Acemoglu and James Robinson posited that the inequality due to capitalist industrialization contained "seeds of its own destruction" and gave way to political and labor reform in Britain and France, enabling redistribution of wealth.

In East Asian economies land reforms that occurred in the 🐷1940s and 1950s helped pave🍬 the way for equitable redistribution even though political reform was delayed. In other words, it was politics, and not economics as Kuznets suggested, that determined inequality levels.

When he defined the concept, Kuznets himself suggested that there was mu🌜ch more work to be done and daꦡta to be collected in order to conclusively prove the relationship between economic development and inequality.

The Bottom Line

Simon Kuznets was an influential economist who won the 1971 Nobel Prize for economics. He's known today for his work on national income accounting. Kuznets also hypothesized that income inequality rises with during the early stages of economic development, then falls as countries become developed. This can be visually represented by an inverted "U"-shaped curve, also known as the Kuznets curve.