As economic development proceeds, income inequality tends to follow a(n) ______ curve.
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1 mark, −0.333Economics of Growth and DevelopmentPoverty, inequality and human developmentInequality, growth and the Kuznets curveEasyabout 1 min
GATE 2021 Question 19: Poverty, inequality and human development
Answer and worked solution
Answer: (B)
This is the classic Kuznets Curve hypothesis (Simon Kuznets): as a country develops economically, income inequality is hypothesized to first rise (during early industrialization, as workers migrate from low-productivity agriculture to higher-productivity but unevenly-distributed industrial sectors) and then fall (as the broader population gains access to education, industrial employment, and redistributive institutions), tracing an inverted-U shape when inequality is plotted against the level of development/per-capita income.
Therefore the answer is (B) inverted U-shaped.
The trap: (D) S-shaped
This is a widely-known, low-ambiguity result; the main risk is confusing it with a differently-shaped curve from an unrelated context (e.g., an S-shaped logistic growth curve) due to surface-level pattern association with 'curves in development economics' rather than specifically recalling the named Kuznets hypothesis.
Poverty, inequality and human development has come up 92 times in 7 exams since 2010.
What this question tests
This question is on Inequality, growth and the Kuznets curve, part of Poverty, inequality and human development in Economics of Growth and Development.
How inequality is thought to change as an economy develops.
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Question from the GATE 2021 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.