In empirical analysis, we usually assume that explanatory variables and explained variables are "linear". But in many cases, there may be a "nonlinear relationship" between explanatory variables and explained variables. In order to solve this problem, researchers often add square terms or even higher-order terms to the model (a common processing method in breakpoint regression analysis RDD). The "inverted U-shaped curve", that is, Kuznets curve, was first put forward by simon Kuznets, a famous American economist and Nobel laureate in economics, at 197 1. Because it is a curve that bends upward first and then the graph bends downward, it looks like an inverted U-shape, so people call it an inverted U-shape curve. From 65438 to 0955, in the article Economic Growth and Income Inequality, Kuznets put forward the relationship between per capita wealth growth (efficiency and development) and per capita wealth distribution (fairness) from the perspective of development economics.
After analyzing the empirical data of economic growth and income gap in 18 countries, Kuznets concluded that the long-term change track of income distribution is "deterioration first, then improvement". Or in his own words, "the long-term trend of income distribution inequality can be assumed as: rapid expansion in the initial stage of economic growth from pre-industrial civilization to industrial civilization, then temporary stability, and then gradual contraction in the later stage of growth." He also came to the conclusion that "the income inequality of developing countries in the early stage of development is higher than that of developed countries in the later stage of development". Kuznets believes that in the early stage of economic development, the growth of per capita wealth will lead to the expansion of income gap; After a short period of stability, with the growth of per capita wealth, the income gap will gradually narrow. But this proposition is only a guess, and the data obtained from the economic development history of European and American countries are not absolutely correct.