Flattening the Kuznets Curve: The Consequences for Income Distribution of Development Strategy, Government Intervention, Income and the Rate of Growth

The relationship between growth and equity has been a disputed issue at least since Simon Kuznets [11] described it as U-shaped. Kuznets ‘s hypothesis that as per capita income rises income distribution would first become less equal and then more equal has been supported by a large array of empirical studies (e.g.: Bacha [4], Ahluwalia [3], Chenery et al. [7], Adelman and Morris [2], Cline [8], Paukert [23]. As a result, there are only a few propositions in economics which have wider acceptance. The Kuznets hypothesis, which applies to the secular process of development over several decades, has sometimes been cited as evidence that there is conflict between growth and equity. Alternative reasons were subsequently advanced for the conflict between these objectives. It was argued that there is also a trade-off between a high rate of growth and an equitable distribution of income, because the policies desirable for a high rate of growth involve strong incentives and rewards to the scarce factors in the hands of the rich.