Income Inequality and Economic Development

The United States is proud to be one of the most successful democratic governance counties. The idea of ​​American dream is that all citizens have equal citizen freedom and response government. However, the effectiveness of democracy is threatened by the expansion of inequality in the United States. "The mainstream view is that economic development and modernization are the key to continued growth of democracy" (Snider and Faris 2001; UN, 2011). Over the past decade, especially in American society, there was an important time to increase equality.

Inequalities can go back as much as possible. I can explain it as a difference. This difference is income, wealth, class, etc. Economic inequality can be explained as difference in revenues of individuals or households both at home and abroad. When it becomes an "income disparity", most people consider it at the national level, but in an increasingly integrated world, economic inequality among countries becomes increasingly important. In the world where the income and wealth of others influence our view of life, we may ask that "economic inequality is the biggest problem of our time".

Income inequality not only exacerbates our financial condition but also affects our physical and mental health, so it is important to find the right way to manage the wealth distribution of people . Historical income disparities in the US have increased or decreased throughout the history, but in recent years the expansion of inequality has become a serious problem. Income gaps are usually measured by the Gini coefficient. In this way, the coefficient varies between 0 and 100, 0 represents full equality (income is evenly distributed among the entire population of the country), 100 stands for complete inequality (only one person is in all I earn income from the country)

In other words, the impact of income disparity on economic development is positive when the net Gini coefficient falls below 27% (net is after tax and post-relocation scale), but if it exceeds 27%, the effect is negative It becomes. It is a value. In addition, the more inequality the country is, the greater the negative impact on economic development will be. Improving access to family services and corporate banking services and promoting women's participation in the labor force will help eliminate the negative impact of the expansion of inequality on economic growth. However, by excessively using poor households or creating excessive workforce, the situation may worsen further.

► We examined the impact of income disparity on economic growth. ► If inequality is large, growth at the initial stage of economic development may be hindered. ► When inequality increases, almost stable growth is expected. ► In the metastable state, you can reduce income disparity by raising income tax. ► In the early stages of development income taxes can not reduce income disparity

Despite the wide range of existing literature on income inequality and economic growth, the impact of inequality on economic growth remains quite different. Existing documents find positive or negative relationships. In this paper, we try to theoretically verify the relationship with stochastic optimal growth model. We express different opinions clearly in one model. We believe that (i) both are possible - higher inequality prevents the early growth of economic development, can promote nearly stable growth, and (ii) income from high income taxes Can be obtained. Distribution does not necessarily reduce income disparity

Research on the relationship between income disparity and development began with a pioneering study of Simon Kuznets, which studied economic growth and income disparity and proposed a hypothesis which is now considered the Kuznets hypothesis or the inverted U hypothesis. . The Kuznets hypothesis forms the basis of most of the previous studies to analyze the relationship between income disparity and growth. Kuznets (1955) assumes that in the early stages of development, national economic growth and inequality will increase. As the country grows and develops, income disparity between rich and poor should shrink. Indeed, according to Kuznets, low inequality, low income agricultural economies are gradually shifting to higher income somewhat inequitable economies characterized by industrial production. This change will result in an inverted U-shaped relationship between real GDP per capita and inequality.