Revisiting the Kuznets curve, 70 years on

We revisit the iconic Kuznets (1955) paper, which postulated a clear positive relationship between inequality and economic development in the early stages of structural transformation. Using a newly released global dataset on income inequality-the WIID Companion-we set out the stylized facts of the Kuznets curve for a range of developing and developed countries. We examine the relationship between the net income Gini and per capita income, as well as the relationship between the net income Gini and structural transformation. Our main findings are that there is a clear inverted U-shaped relationship between the Gini and per capita income for the global sample, though the slope of the Kuznets curve differs substantially by income region. With respect to manufacturing-driven structural transformation, we see a clear negative relationship between the Gini and manufacturing employment share. However, when we broaden our concept of structural transformation to include financial and insurance services, we do see some evidence of the Kuznets curve. Further, national Kuznets curves produce mixed results-some follow the inverted U shape, and others do not. Overall, our findings suggest that while the Kuznets curve remains an important stylized fact, at least for some country contexts, inequality is not an inevitable consequence of economic development.