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The Kuznets curve versus cycles: rethinking the determination and long-run evolution of income distribution

Author

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  • Thomas Palley

    (Economics for Democratic and Opens Societies)

Abstract

This paper presents a theory and model of long-run cycles in income inequality. The model explains the historical pattern of income distribution identified by Kuznets (1955) and Piketty (2014). It breaks with conventional marginal product theory which claims functional income distribution is determined by the technological conditions of production. Instead, it emphasizes the role of socio-political forces that shape and drive fluctuations in the level of popular political organizations, which then impact distribution. That impact includes assessment and attribution of productivity contributions. The model provides a framework for interpreting the historical evolution of income distribution and inequality, and for reflecting on current conditions and possible future developments. The core message is twofold. First, socio-political developments matter for income distribution. Second, if those developments are cyclical, income distribution will also exhibit cyclicality.

Suggested Citation

  • Thomas Palley, 2025. "The Kuznets curve versus cycles: rethinking the determination and long-run evolution of income distribution," FMM Working Paper 117-2025, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    • Handle: RePEc:imk:fmmpap:117-2025
    as

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    References listed on IDEAS

    as
    1. Burgin, Angus, 2012. "The Great Persuasion: Reinventing Free Markets since the Depression," Economics Books, Harvard University Press, number 9780674058132, Spring.
    2. Thomas Piketty & Emmanuel Saez, 2003. "Income Inequality in the United States, 1913–1998," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(1), pages 1-41.
    3. Thomas I. Palley, 1996. "Out of the Closet: The Political Economy of Neo-classical Distribution Theory," Review of Radical Political Economics, Union for Radical Political Economics, vol. 28(3), pages 57-67, September.
    4. Daron Acemoglu & James A. Robinson, 2000. "Why Did the West Extend the Franchise? Democracy, Inequality, and Growth in Historical Perspective," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(4), pages 1167-1199.
    5. Palley, Thomas I. & LaJeunesse, Robert M., 2007. "Social attitudes, labor law, and union organizing: Toward a new economics of union density," Journal of Economic Behavior & Organization, Elsevier, vol. 62(2), pages 237-254, February.
    6. Samuel Bowles & Herbert Gintis, 1990. "Contested Exchange: New Microfoundations for the Political Economy of Capitalism," Politics & Society, , vol. 18(2), pages 165-222, June.
    7. Sebastian Gechert & Tomas Havranek & Zuzana Irsova & Dominika Kolcunova, 2022. "Measuring Capital-Labor Substitution: The Importance of Method Choices and Publication Bias," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 45, pages 55-82, July.
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    Keywords

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    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • N3 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy

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