According to his hypothesis, at low levels of economic development, economic growth causes increased. The kuznets hypothesis stimulated a large number of theoretical and empirical studies, which provided more solid theoretical grounds and empirical evidence on the existence of the kuznets curve. As an empirical investigation of the relationship between development and inequality in china over the postreform period of 19782011, our paper provides a useful test of the kuznets hypothesis. During the twentieth century, economists began analyzing the growth and development of economies to determine their. The developing economies in the kuznets hypothesis have four characteristics that distinguish them from mature economies. In economics, a kuznets curve graphs the hypothesis that as an economy develops, market. Thus the relationship between income distribution and income level can be described by an inverted ucurve. The ekc is named for kuznets 1955 who hypothesized income inequality first rises and then falls as economic development proceeds. Structural transformation, growth incidence and inequality saumik paul abstract in 1955, in an influential study kuznets 1955 predicted an invertedu relationship between development and inequality, mainly through structural transformation. Sep 10, 2014 traditional economic analysis of the association between development and pollution has largely been framed from the perspective of the environmental kuznets curve ekc hypothesis. Apr 10, 2019 kuznets curve has not survived without its share of critics.
A survey soumyananda dinda economic research unit, indian statistical institute, 203, b. The environmental kuznets curve suggests that economic development initially leads to a deterioration in the environment, but after a certain level of economic growth, a society begins to improve its relationship with the environment and levels of environmental degradation reduces. This study develops a general equilibrium model in which the evolution of income inequality and output conforms with the kuznets hypothesis. The study tests the environmental kuznets curve ekc hypothesis on gni per capita and co2 emission for 39 economies of the world using panel data for the period 19902015. A rational theory of income inequality and the size of government in a dynamic model of kuznets hypothesis jeffrey liang american enterprise institute and allan h. One explanation of such a progression suggests that early in development, investment opportunities for those who have money multiply, while an influx of cheap. An altemative hypothesis to country income inequality. Pdf the kuznets hypothesis, that is, inequality first rises and then falls as the economy advances, is often tested by regressing inequality on. Testing the environmental kuznets curve hypothesis for the. Structural transformation, growth incidence and inequality. These characteristics might lead to an inverted ushaped.
The rise and fall of the environmental kuznets curve david i. Munich personal repec archive keynes absolute income hypothesis and kuznets paradox alimi, r. We found that the environmental kuznets curve hypothesis is supported in most of the eu economies, both for government environmental. First, a number of poor countries might not have passed what kuznets identified as the initial industrialization stage. The kuznets hypothesis suggests that inequality is low at a lower income level but later increases at higher income level with economic growth.
They also provide a basis on which the kuznets hypothesis may be further examined in the future and suggest that rising inequality may not be a necessary part of the process of a countrys development. According to the kuznets inverted uhypothesis, as per capita national income of a country increases, in the initial stages of growth, inequality in income distribution rises and after reaching the highest degree in the intermediate level the income inequality falls. April 30, 1901 july 8, 1985 was an american economist and statistician who received the 1971 nobel memorial prize in economic sciences for his empirically founded interpretation of economic growth which has led to new and deepened. The nobel laureate simon kuznets was a pioneer in the study of income inequality, writing in 1955. Following the kuznets curve hypothesis, first formulated in the 1950s, another common view among economists has been that income inequalityand possibly wealth inequality as wellshould first rise and then decline with economic development, as a growing fraction of the population joins highproductivity sectors and benefits from industrial. Manufacturing and export grew quickly and powerfully. Focusing on indonesia, this study analyzes the relationship between inequality and the process of urbanization.
Section 2 surveys the three main hypotheses upon which this papers dwells. Much of this literature sought to test the environmental kuznets curve ekc hypothesis, which posits that in the early stages of economic development environmental degradation will increase until a certain level of income is reached known as the turning point and then environmental improvement will occur. Kuznets was a member of the research staff of the nber from 1927 to 1961. Pdf on feb 2, 2017, joanna muszynska and others published kuznets hypothesis of income inequality. The original version of the kuznets curve argument relies mainly on kuznets 1955s. A successful theory of the kuznets curve should therefore not only. The environmental kuznets curve ekc hypothesis posits that ecological degradation as a result of different pollutants upsurges at the primary stages, but declines as the economy attains a particular level of economic growth, determined by. For instance, the hypothesis holds that in the early development of an economy. This contradiction between kuznet empirical findings and keynes consumption function has been called consumption function puzzle.
Determinants of cross an altemative hypothesis to country income inequality explain why income inequality differs among countries. Kuznets inverted ucurve hypothesis examined on upto date. Following kuznets original insights, we test for an inverted u relationship between employment outside agriculture and income inequality, instead of the traditional focus on gdp per capita and income inequality. While data from some latin american countries, such as colombia and brazil, seems basically consistent with the hypothesis, asian countries such as south korea, japan, and taiwan have experienced monotonically falling inequality. Structural change and the kuznets hypothesis gala university. Marginal pdf of a the gini index and b the logarithm of gdp per capita. During the twentieth century, economists began analyzing the growth and development of economies to determine their welfareimproving effects on citizens. Introduction the environmental kuznets curve is a hypothesized relationship between various indicators of environmental degradation and income per capita.
One early approach was the relativeincome hypothesis, which asserted that a households consumption depends not only on its current disposable income, but also on current income relative to past levels and relative to the income of other households. Kuznets hypothesis can be divided into a withinsector and a betweensector and inequality frankema, 2006. Jul 23, 2009 this paper uses a novel approach for testing kuznets hypothesis. So it is still important to make sure that we understand why developed countries went through an initial inverseu curve.
We found that, given the shortcomings in both the theoretical and empirical aspects of the analyses applied to this hypothesis, no onefitforall invertedushaped curve can describe adequately the relationship between growth. In his classic paper, kuznets 1955 presented the idea of an inverted ushape relationship between income inequality and economic development. Due to limitations of data he used an inequality measure of the ratio of income share of the richest 20 per cent of the population to the bottom 60 per cent of the population known as kuznets ratio. By the turn of the century, kanbur 2000 felt that the dominance of the kuznets hypothesis in income distribution research had become counterproductive. James van alstine and eric neumayer the environmental. This paper presents a critical history of the environmental kuznets curve ekc. In economics, a kuznets curve graphs the hypothesis that as an economy develops, market forces first increase and then decrease economic inequality. A rational theory of income inequality and the size of.
An empirical examination of the environmental kuznets curve. Section 4 examines a minskytype of longperiod cycles. Crawford school of public policy centre for climate. The hypothesis was first advanced by economist simon kuznets in the 1950s and 1960s. Critics of the kuznets curve theory argue that its ushape comes not from. The aih model was tested by ordinary least squares over the period using. Kuznets hypothesized that income inequality increases. Numerous crosssectional studies established the kuznets curve as a stylized fact, dominating empirical and theoretical research on the effect of. Itperforms a panel data regression analysis to test the kuznets invertedu hypothesis for urbanization based on a provincial panel data set of 33 provinces over the period 20002009, constructed by using the core national socioeconomic survey core susenas. Environment, human development and economic growth pdf. Inequality in richer an augmented kuznets hypothesis societies decreases not only an augmented kuznets hypothesis because of economic factors but also because societies branko milanovic choose less inc.
Investigating the environmental kuznets curve hypothesis. The hypothesis states that at very low levels of income, income inequality must also be low. Understanding poverty abhijit banerjee roland benabou. Kuznets curve was an empirical reality, to the point where theorists creating models with income distribution dynamics made sure they were able to replicate a kuznets curve in their models. Urbanization and expenditure inequality in indonesia.
From this estimation, we found a regressing income distribution for the prewar period and a dramatic decrease in inequality between prewar and postwar periods. Stern rensselaer polytechnic institute, troy, ny, usa available online summary. The former relates to ruralurban income inequality while the latter refers to intraurban and intrarural inequalities. In doing so, the results call into question the traditionally held view of the relationship between income inequality and human development. The primary argument of critics of kuznets hypothesis and its resulting graphical representation is based on the countries used in kuznets data set. A successful theory of the kuznets curve should therefore not only explain the inverseu shaped pattern of inequality in the development experience of european. Since then a large body of research has empirically tested the kuznets hypothesis, but consensus is. Santos adekunle ajasin university, akungbaakoko, ondo state nigeria 26 august 20 online at mpra paper no.
Stern department of economics, rensselaer polytechnic institute, troy, ny 12180, usa june 2003 1. The rate of total increase we start with the rate of population growth. This hypothesis has since become one of the most hotly debated issues in. In a biography about simon kuznets scientific methods, economist robert fogel noted kuznets own reservations about the fragility of the data which underpinned the hypothesis. This hypothesis enjoyed considerable popularity in the 1950s, but is not discussed much. Environmental science and pollution research, volume 22 21. The kuznets curve hypothesis stems from the initial work of kuznets 1955 who revealed an inversedu shaped relationship between income per capita and income inequality. Simon kuznets put forward the hypothesis that relationship between per capita national income and the degree of inequality in income distribution may be of the form of invertedu. Pdf an appropriate test of the kuznets hypothesis researchgate. The empirical validity of this kuznets curve has been intensively inves. None of this research tested kuznets hypothesis directly. Keynes absolute income hypothesis and kuznets paradox. The paper then tests the validity of the kuznets hypothesis using panel data. Kuznets made a decisive contribution to the transformation of economics into an.
Apr 26, 2019 deforestation may follow a kuznets curve cf. They were married in 1929 and had two children, paul and judith. During the course of his career he produced 31 books and over 200 papers, many of which set off major new streams of research. Kuznets 205 neered, in addition to national income accounting, were.
Economic development and income distribution in japan. Abstractcarbon dioxide co2 emissions have been rising globally and have raised public concern regarding their detrimental effects to human life. An ardl bounds testing approach developing countries to know whether grow first, clean up later is a costly strategy in a longrun view, and whether it can be a threat against the sustainability of growth itself. Economic growth, biodiversity loss and conservation effort. This article investigates the validity of the environmental kuznets curve ekc hypothesis in developing countries in a nonlinear framework. Kuznets also held professional appointments in economics and statistics at the university of pennsylvania 193054 and in economics at johns hopkins 195460 and.
Our results, obtained using panel and country by country regressions, do not support kuznets hypothesis. The environmental kuznets curve after 25 years david i. This relationship which today has become known as the environmental kuznets curve e kc hypothesis, named after simon kuznets 1955 stipulates that an inverted ushaped nonlinear relationship exist between environmental degradation and per capita income along a countrys growth path. Gdp and population data 19692007 from 36 nations and regions, comprising the entire global economy and population, demonstrate a global. As income per capita increases at the initial stages, income inequality follows the same path but begins to decline after reaching a turning point. Kuznets was a prolific analyst of economic processes and institutions. Economic growth, biodiversity loss and conservation effort simon dietza, w. In fact, kuznets himself emphasized the fragility of his data among other caveats in his paper. In the 1950s and 1960s, simon kuznets hypothesized that as an economy develops, market forces first increase then decrease the overall economic inequality of the society, which is illustrated by the inverted ushape of the kuznets curve. Since we are interested in focusing on major movements, we employ fiveyear averages of the basic data,4 a choice governed partly by preferenceto eliminate or at. The environmental kuznets curve ekc hypothesis postulates an inverted ushaped relationship between different pollutants and economic growth. In a seminal paper, kuznets 1955 argued that as countries developed, income inequality. Apr 10, 2019 the kuznets curve, formulated by simon kuznets in the mids, argues that in preindustrial societies, almost everybody is equally poor so inequality is low.
Empirical evidence from turkey ahmet ugur1 and esma gultekin2 this study investigated the important relationship between environmental factors and economic growth within the context of adaptation to the environment. An alternative test of kuznets hypothesis springerlink. Pdf is the environmental kuznets curve hypothesis valid. Meltzer carnegie mellon university and american enterprise institute in his presidential address to the american economic association and in. The environmental kuznets curve ekc hypothesis postulates an invertedushaped relationship between different pollutants and per capita income, i. Please note that corrections may take a couple of weeks to filter through the various repec services. Ekc research appeared in the academic literature in the early 1990s, and a number of studies have been undertaken which examine this hypothesis. Typically the logarithm of the indicator is modeled as a quadratic function of the logarithm of income. In his analysis, he theorized how an interindustry shift to the service sector will have an impact on earning inequalities, although such an impact is almost irrelevant to the entire populations income distribution kuznets, 1955. Section 3 builds on the preceding discussion and analyzes varying time scales and mechanisms of economic cycles prevalent in economic theory. The hypothesis was first advanced by economist simon kuznets in the s and 60s. Revisiting the environmental kuznets curve hypothesis in a. An example of an estimated ekc is shown in figure 1. Environmental kuznets curve for deforestation in indonesia.
As a time series analysis of the relationship between development and inequality in china over the postreform period of 19782011, our study provides a useful test of the kuznets hypothesis. Noting increasing economic equality in three developed nations and using a theoretical economic model, kuznets hypothesized that economic development was associated with initial increasing economic inequality followed by decreasing economic inequality. S the forces of economic development determine the shape of income distribution. This paper surveys the existing environmental kuznets curve studies and discusses to what extent they may be valid and applicable for developing countries. For 18911921, a preliminary esti mation was attempted based on 39 selected villages, towns and cities. Is the environmental kuznets curve hypothesis valid for. In the quest towards a cleaner environment via the mitigation of climate change and its impact, this study examined the validity of the environmental kuznets curve ekc hypothesis, energy efficiency and energy consumption indicators in kenya. Some differences between the published version and this version.
Validity test of environmental kuznets curve hypothesis in. A similar comparison for population, either for europe or for the area of european settlement i. The validity of environmental kuznets curve in the relevant period is tested by means of co2, gdp, energy consumption, industrial production and service production variables. At the end of the study, the relationship in inverse ushaped between environmental pollution and economic growth that environmental kuznets curve put forth has been. Section 3 describes patterns in inequality, openness and cohort. The rise and fall of the environmental kuznets curve.
The kuznets hypothesis of inverted ucurve dependence of the income inequality. This chapter deals with the environmental kuznets curve ekc hypothesis, as one hypothesis that speaks to the possibility of sustainable development. Pdf estimation of environmental kuznets curve for india. Ruralurban inequality usually explains the majority of a. In ghana, as in many other developing countries, there exist scanty studies that confirm or otherwise the ekc hypothesis with regards to co 2 emissions as well as the factors that drive co 2 emissions. Simon kuznets, russianborn american economist and statistician who won the 1971 nobel prize for economics, cited for his empirically founded interpretation of economic growth which has led to new and deepened insight into the economic and social structure and process of development. Whichever factor increases the inequality, the scurve hypothesis is di erent from the kuznets hypothesis, at least the hypothesis in his own work 1955, 1963. It is worth pointing out, in light of the alternative hypothesis proposed here, that the kuznets hypothesis puts at center stage the role of economic factors, that is, of the supply of, and demand for, various factors of prodcclaun. Stern crawford school of public policy, the australian national university, 2 lennox crossing, acton, act 2601, australia. An reyhan cafri the results of research in recent years have claimed that the relationship between economic growth and income inequality no longer supports kuznets inverseu hypothesis. Kuznets inverted uhypothesis on income inequality economics. Simon smith kuznets was an american economist and statistician who received the 1971 nobel memorial prize in economic sciences for his empirically founded interpretation of economic growth which has led to new and deepened insight into the economic and social structure and process of development. We generated a kuznets curve based on the original.
1380 541 302 942 139 996 932 765 1269 602 253 284 1008 927 448 1101 842 593 919 809 58 809 520 774 1065 1453 617 740 682 168 882 425 632 1590 946 1212 1091 350 1231 110 229 973 1029 1123 128 621 406