We recently learned of the Kuznets curve, a theory stating that as a country in its infancy develops, the gap in income inequality widens. However, the curve also suggests that at a particular point, the economy begins to correct for this through various reforms. In effect, we can graph this using a U-shaped curve with level of inequality on the Y-axis and level of development on the X-axis.
But what would determine the point in which the graph becomes downward sloping? Vivek Dehejia provides his opinion on what happens in this graph. He believes that corruption is inevitably linked to rapid economic growth. So as the country develops and the income gap is widening, there is also corruption occurring in the economy. He states that eventually, the government has to intervene and help to redistribute the wealth gained in this period of time. He then takes this knowledge and applies it to various developing nations and states that they must find a way to “share the fruits of development more equitably and to curtail corruption”. I agree that is it essential for a growing economy to monitor the influence of corruption. We know that severe income disparity can hinder a country’s growth rate as they do not invest in the sufficient public institutions as the minority elite ruling class will not have incentive to provide these services/rights to the rest of the country. We know that the United States flourished, while other countries, such as Barbados, with better initial factor endowments were unable to keep up with pressing issues such as corruption and income equality. I do believe Dehejia to be right in his assertion that the two will come hand in hand if measures aren’t specifically taken to prevent them.
Source: http://www.nytimes.com/2011/04/14/opinion/14iht-eddehejia14.html?
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