Does inequality first rise, then fall, as a country gets rich?

Maybe, said the economist Simon Kuznets, but the evidence is mixed. In the 1950s and 1960s he proposed that as an economy develops, market forces first increase and then decrease inequality. Drawn on a graph, with income per person along the bottom and inequality up the side, that story makes an upside-down U, known as the Kuznets curve. Kuznets, a Russian-born American, later won the 1971 Nobel Prize in economics.

His reasoning went like this. To grow, countries had to shift from farming, where there was little variation in incomes, to industry, where industrialization led to large differences in income. Another explanation points to the early stages of development, when people with money find more places to invest while a flood of cheap rural labour into the cities holds wages down.

The curve became famous, though Kuznets himself was cautious. The economist Robert Fogel noted that Kuznets himself had reservations about the fragility of his data. Fogel says Kuznets's caveats were overlooked, and the curve was raised to the level of law by other economists.

Today the hypothesis remains highly contested, with no consensus on whether it is valid. Inequality has risen in most developed countries since the 1960s, so graphs over time no longer show a clean curve. Critics add that the U-shape came from historical differences between countries rather than from countries moving along one path. The question stays open.