Cambridge International as and a level Economics Ebook

The Kuznets curve
Th
is inverted U-shaped curve was fi rst drawn by the 
American economist Simon Kuznets. Th
e 
Kuznets curve
suggests that as an economy develops, income becomes 
more unevenly distributed and then aft er a certain 
income level is reached, income becomes more evenly 
distributed as shown in 
Figure 9.9.
Th
e thinking behind this initial rise in income inequality 
is that as an economy develops there will be a movement of 
labour from low-paid and low-skilled agricultural jobs to 
higher paid and more skilled manufacturing jobs.
Th
is suggested trend, however, is not being followed 
in all developing economies. Th
e curve also does not 
explain the rise in income inequality in some developed 
economies such as the UK.
Multidimensional Poverty Index (MPI): 
a composite 
measure of deprivation in terms of the proportion of 
households that lack the requirements for a reasonable 
standard of living.
KEY TERM
0
Gini coefficient
GDP per head
0.25
0.5
0.75
Figure 9.9 
The Kuznets curve
Kuznets curve: 
a curve that shows the relationship 
between economic growth and income inequality.
KEY TERM
231
Chapter 9: The macroeconomy 

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Ranking
Very high human 
development 
Country
HDI value
Life 
expectancy at 
birth (years)
Mean years of 
schooling
(years)
Expected years 
of schooling
(years)
GNI per capita
2005
PPP (US$)
1
Norway
0.955
81.3
12.6
17.5
48,688
2
Australia
0.938
82.0
12.0
19.6
34,340
3
US
0.937
78.7
13.3
16.8
43,480
4
Netherlands
0.921
80.8
11.6
14.9
37,282
5
Germany
0.920
80.6
12.2
16.4
35,431
6
New Zealand
0.919
80.8
12.5
19.7
24,358
7
Ireland
0.916
80.7
11.6
18.3
28,671
7
Sweden
0.916
81.6
11.7
16.0
36,143
9
Switzerland
0.913
82.5
11.0
15.7
40,527
10
Japan
0.912
83.6
11.6
15.3
32,545