The Kuznets curve was based upon empirical evidence and it supports the hypothesis that as an economy develops, market forces first increase income inequality and then reduce it.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2018). The mark or mark type is shown in brackets.

1. Answers should explain discuss the links between the process of economic development and how this might impact upon income distribution. Worker migration from agriculture to industry and the movement from a rural to an urban environment should be explained in the context of economic development. These movements should then be linked to factors such as increases in income and access to education, to explain the first part of the hypothesis and then some attempt to explain how these benefits might be shared as productivity in general starts to rise.
2. L4 (9-12 marks): for an answer that addressed both parts of the hypothesis and questions whether the preceding analysis is sufficient to justify the contention that inequality will initially become greater but then factors related to development will eventually lead to a more equal distribution of income. Alternative explanations should be given and evaluative comment provided in relation to both developed and undeveloped economies.
3. L3 (7-8 marks): for an answer that attempts to analyse the relationship between changes in the structure of the economy by examining why the movement from a rural environment to an urban environment will initially increase the level of inequality and explaining this by referring to changes in income, employment and access to education.
4. L2 (5-6 marks): for an answer that demonstrates some knowledge and understanding of some key characteristics of an undeveloped economy and which recognises that there are often significant differences in income distribution related to changes in the structure of the economy.
5. L1 (1-4 marks): For an answer that shows some knowledge but does not indicate that the question has been fully grasped or where the answer is mostly irrelevant.
6. Candidates should ensure that responses focus on developed economies and primarily the role of fiscal policies. Answers should attempt to explain why such inequalities exist and consider the role of a range of fiscal policies which might be used to address the problem. This might include reference to progressive taxation, maximum price controls, minimum wage controls and transfer payments. In each case candidates should discuss the potential of each to redistribute income and consider any long term negative consequences.
7. L4 (9-13 marks): for an answer that recognises that all types of fiscal policy have costs and benefits and it is necessary therefore to consider the wider consequences for the economy of such polices. For example, candidate might refer to the potential negative impact of progressive taxation on investment and economic growth. A conclusion should emerge out of the preceding argument.
8. L3 (7-8 marks): for answer that attempts to analyse the links between at least two changes in fiscal policy and in each case examine the impact on the current income distribution. An analysis of the potential costs of such policies and whether it is possible to rely solely on market forces might also be provided.
9. L2 (5-6 marks): for an answer that is descriptive and which does not make it clear that it is assessing a problem facing a developed economy. Some reference will be made to the use of fiscal policy but the alternatives will be limited and there will be little attempt to analyse the links between changes in fiscal policy and their impact on income distribution.
10. L1 (1-4 marks): for an answer that has some basic correct facts but includes irrelevancies and errors of theory.