Kuznets curve
[5] One explanation of such a progression suggests that early in development, investment opportunities for those who have money multiply, while an influx of cheap rural labor to the cities holds down wages.
Whereas in mature economies, human capital accrual (an estimate of income that has been achieved but not yet consumed) takes the place of physical capital accrual as the main source of growth; and inequality slows growth by lowering education levels because poorer, disadvantaged people lack finance for their education in imperfect credit-markets.
As internal migration by farmers looking for better-paying jobs in urban hubs causes a significant rural-urban inequality gap (the owners of firms would be profiting, while laborers from those industries would see their incomes rise at a much slower rate and agricultural workers would possibly see their incomes decrease), rural populations decrease as urban populations increase.
Piketty has argued that the decline in inequality over the first half of the 20th century was a once-off effect due to the destruction of large concentrations of wealth by war and economic depression.
For instance, many of the middle income countries used in Kuznets' data set were in Latin America, a region with historically high levels of inequality.
Regarding the empirical evidence, based on large panels of countries or time series approaches, Fields (2001) considers the Kuznets hypothesis refuted.
Yet, contrary to Kuznets' historical examples, the EAM saw continual increases in life expectancy and decreasing rates of severe poverty.
Fogel emphasized Kuznets's opinion that "even if the data turned out to be valid, they pertained to an extremely limited period of time and to exceptional historical experiences."
So although their evidence seems to support the Kuznets theory in relation to trade liberalization, Dobson and Ramlogan assert that policies for redistribution must be simultaneously implemented in order to mitigate the initial increase in inequality.
[19][20] It has been argued that this trend occurs in the level of many of the environmental pollutants, such as sulfur dioxide, nitrogen oxide, lead, DDT, chlorofluorocarbons, sewage, and other chemicals previously released directly into the air or water.
At least one critic argues that the US is still struggling to attain the income level necessary to prioritize certain environmental pollutants such as carbon emissions, which have yet to follow the EKC.
As a country develops, the marginal value of cleaning up such pollutants makes a large direct improvement to the quality of citizens' lives.
Conversely, reducing carbon dioxide emissions does not have a dramatic impact at a local level, so the impetus to clean them up is only for the altruistic reason of improving the global environment.
[26] However, there seems to be little consensus about whether EKC is formed with regard to CO2 emissions, as CO2 is a global pollutant that has yet to prove its validity within Kuznet's Curve.
[27] That said, Yandle et al. also concluded that "policies that stimulate growth (trade liberalization, economic restructuring, and price reform) should be good for the environment".
Levinson concludes that the environmental Kuznets curve is insufficient to support a pollution policy regardless of whether it is laissez-faire or interventionist, although the literature has been used this way by the press.
Thus, this progression of environmental clean-up occurring in conjunction with economic growth cannot be replicated indefinitely because there may be nowhere to export waste and pollution-intensive processes.
He finds that "little or no attention has been paid to the statistical properties of the data used such as serial dependence or stochastic trends in time series and few tests of model adequacy have been carried out or presented.
For example, Armenia, after gaining its independence from the Soviet Union, has become the country with the least income elasticity in Eastern Europe and Central Asia.
[31] Steel production has been shown to follow a Kuznets-type curve in the national development cycles of a range of economies, including the United States, Japan, the Republic of Korea and China.
A body of work on "Material Kuznets Curves" focused on non-ferrous metals has also emerged as academic and policy interest in resource intensity increased during the first two decades of the 21st century.
