Simon Kuznets Economic Theory

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KUZNETS’S INVERTED U HYPOTHESIS KUZNET (LIFE) Simon Kuznets was born in a Jewish family in Pinsk (located in Belarus) on the 30th of April, 1901. When his family shifted to Rivne, he attended a Realschule. Soon, due to the war conditions, his family relocated to Kharkiv where he attended the University of Kharkiv. He learnt various disciplines that included Economic sciences, History, Statistics and Mathematics. He was introduced to economic theory and Schumpeter’s works during this time. The rise of Civil war disrupted the routine of the university and he joined the Department of Labor of UZHBURO of the Central Council of Trade Unions. He published his first scientific paper whilst working here, namely; “Monetary wages and salaries of factory…show more content…
Kuznets graph is accompanied with a unique identity where the variables are mixed and matched but with the same reference and o would still give an idea of the functioning of any economic system. KUZNETS RATIO Kuznets ratio measures the income that goes to the highest-earning households, which usually constitutes the top 20%, and the income that goes to the lowest-earning households, which is usually measured from the bottom 20% or the lowest 40% income earners. When we compare the first 20% to the next 20%, the perfect inequality is expressed as 1. But a comparison of 20% to the 40%, the value is being changes to 0.5. Kuznets had proposed two particular reasons as to why this would occur and they are as follows: 1) A migration of workers from agricultural sector to the industrial sector 2) The shift in workers from the rural areas who move to urban areas for urban jobs Either of these reasons would see a decrease in inequality after 50% of the work force swaps over to the higher wage receiving…show more content…
This accounts for the rapid increase in the economic growth or 8 East Asian countries, namely; South Korea, Japan, Taiwan, Hong Kong, Malaysia, Thailand, Singapore and Indonesia, which was noted between 1965 and 1990 and was termed as the East Asian miracle. There was a quick and powerful increase in the manufacturing sector and exports from these countries. Along with this, these countries saw an increase in life expectancy and a decrease in the levels of population living under absolute poverty. This development was a particular stand point that disproved Kuznets curve theory. There have been a lot of studies that have aimed at studying how the East Asian miracle was ensuring a broad distribution of benefits from the rapid economic growth to most of the population, given that Kuznets theory had clearly stated that rapid capital accumulation will initially lead to an increase in inequality. Hence Kuznets theory stood refuted when in case of the East Asian
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