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28 June, 11:26

How does it resolve the seemingly contradictory pieces of evidence regarding consumption behavior found by Kuznets?

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  1. 28 June, 13:15
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    Answer: The Kuznets curve implies that as a nation undergoes industrialization - and especially the mechanization of agriculture - the center of the nation's economy will shift to the cities. 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. Inequality is then expected to decrease when a certain level of average income is reached and the processes of industrialization - democratization and the rise of the welfare state - allow for the benefits from rapid growth, and increase the per-capita income. Kuznets believed that inequality would follow an inverted "U" shape as it rises and then falls again with the increase of income per-capita.
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