An inverted-U hypothesis, put forward by economist Simon Kuznets, proposing that as a country develops, income inequality first rises and then falls once a certain average income is reached.
- On the vertical axis is inequality and on the horizontal axis is per-capita income or the stage of development; the curve rises then falls.
- The idea is that early industrialisation shifts people from low-inequality agriculture into higher-paying but unequal urban industry, widening inequality, which later narrows as more share in growth.
- It is a hypothesis, not a law; many economies have not followed the predicted decline, and inequality has risen again in several advanced countries.
- The "environmental Kuznets curve" extends the same inverted-U shape to pollution versus income, suggesting pollution rises then falls with development.
- It connects to inequality measures like the concept gini coefficient and the concept lorenz curve.
The inverted-U shape, the Simon Kuznets association, and the environmental Kuznets curve extension are testable growth-and-welfare facts.
The Kuznets curve plots inequality against development (rise then fall), unlike the Lorenz curve (income distribution) or the Laffer curve (tax rate versus revenue); it is a contested hypothesis, not an established law.
Inverted-U: inequality rises then falls as income grows (Simon Kuznets); an environmental version applies to pollution.