Economics
Distribution of Income
The distribution of income refers to how the total income in a society is divided among its members. It examines the allocation of income across different individuals or groups, often measured using metrics like the Gini coefficient. This concept is central to understanding economic inequality and social welfare within a given population.
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10 Key excerpts on "Distribution of Income"
eBook - PDF- David Stager(Author)
- 2013(Publication Date)
- Butterworth-Heinemann(Publisher)
Nevertheless, the Council defined the goal to include at least the elimination of poverty and the reduction of regional income disparities. The problem of poverty is considered later in this chapter, and regional income disparity is the subject of the next chapter. Income Distribution among Productive Factors In a pure market system, the economy's output of goods and services would be distributed among the population according to incomes deter-mined solely by the quantity of productive services offered by indivi-duals and the prices of these services. That is, the incomes received would represent purchasing power or claims on the real goods and ser-vices available: the more services one could offer or the higher the price of one's service, the more goods and services one could buy. Distribution as it would be determined by a free market system is modified somewhat in a mixed economy by government regulations and direct intervention. Functional Distribution of Income The Distribution of Income according to the basic types of productive factors —land, labour, and capital —is termed the functional distribu-tion of income. Statistics for the national income and expenditure accounts are not collected and arranged in a way that shows precisely the share of national income going to each type of factor, but an esti-mate of these shares can be obtained from the components of Net National Income. Table 26.1 shows an approximation of the functional Distribution of Income, which treats employee earnings as the return to 614 Chapter Twenty-six labour services, and corporate profits, interest, and dividends as the return to capital. Income of unincorporated enterprises (small business and farms) represents a combined return to land, labour, and capital used in these businesses. The relative share of the national income received by each factor has been fairly stable over a long period of time, with employee earnings representing about 75 per cent of the total income.
eBook - PDF- John Leach(Author)
- 2003(Publication Date)
- Cambridge University Press(Publisher)
Because disparities that arise from the first two causes can be offset by a redis-tribution of income (e.g., transfers to the chronically ill from the rest of the population), disparities in economic welfare can ultimately be ascribed to the Distribution of Income. Just how unequal is the Distribution of Income? Pen [48] visualizes the income distribution as a parade. 1 Every income-earner in the economy marches in the parade, at such a rapid pace that they all pass in front of us over the course of one hour. The marchers are stretched or shrunk so that their height is proportional to their pre-tax income. People with average incomes have average height (say, 1.7 meters). People with smaller incomes are shrunk and people with higher incomes are stretched. The marchers are ordered by height, with the shortest first and the tallest last. The first few marchers are underground, with “their feet on the ground and their heads deep in the earth.” They are the entrepreneurs who have lost money over the course of the year. They are followed by occasional workers, such as high school students with 1 The data roughly approximate the income distribution in the United States and the United Kingdom around 1970. 349 The Distribution of Income 350 part-time jobs: they only come up to our (normal sized) ankles. The marchers’ heights then increase quite sharply, to about one meter, as those elderly and disabled people who are dependent on government pensions pass by. Once they are gone, the heights of the marchers increase gradually – very gradually – until, with only twelve minutes left in the parade, the people of average height pass by. Now heights begin to grow more rapidly. With only a few minutes left in the parade, the doctors, lawyers, and accountants begin to pass by. The first of these are six meters tall. The heights of these and other professionals grow rapidly, and then the professionals give way to senior executives, whose heights can exceed 100 meters.
- Bikas K. Chakrabarti, Anirban Chakraborti, Satya R. Chakravarty, Arnab Chatterjee(Authors)
- 2013(Publication Date)
- Cambridge University Press(Publisher)
7 Dynamics: generation of income, inequality and development In some of the earlier chapters, we have presented in detail the models which have been inspired from physical theories. In the last chapter, we presented a simple economic model which intends to capture the basic features of the kinetic exchange models. The objective of this chapter is to present analytical discussions on stochastic and related economic models of the Distribution of Income and wealth. 7.1 The economic significance In order to get an idea about the distributional effects of a particular economic policy it often becomes necessary to have information on the Distribution of Income. Also inequality based on Distribution of Income has important effects on development, social outcomes and public finance. The shape of the income distribution in a country enables the policy-makers to get an idea about the amount of tax collection. For instance, in Germany 50.6% (19.7%) of the entire income tax is paid by the top 10% (1%) of the taxpayers (see Merz et al. 2005). There are economic and non-economic reasons for separate study of the distri- bution of wealth that cannot be interpreted as human capital, such as educational background. Examples of wealth of this type are financial assets and real proper- ties. Unlike human capital they can be traded in appropriate markets at the time of necessity; for instance, when the flow of regular income reduces (after retirement) and when consumption is likely to increase with an increase in family size. Precau- tionary motive for saving is also regarded as a major reason for accumulation of wealth. Wealth accumulation is often taken as an indicator of social status. Wealth may be retained as well for the purpose of bequests. A variety of size distributions, including income, wealth, employment and firms ranked in terms of assets have been observed to demonstrate many similar charac- teristics.
eBook - PDF- Kamel Abu Jaber(Author)
- 2019(Publication Date)
- Taylor & Francis(Publisher)
The same heldtrueforthe size Distribution of Income. As every member of society became better off, measurement of the discrepancies in the level at which they enjoyed the benefits of development was not felt to be pressing. Consequently, very few studies were carried out on changes in the Distribution of Income during the 19708 and 1980s and even those gave conflicting results. Since the early 1980s, the Jordanian economy has witnessed a marked slowing in its economic growth rates. As a result, various sectors of the population have come to the attention of planners and policymakers. Distributional issues of development have once again been at the forefront of economic concerns. A regional planning program was launched in 1986 to partially deal with such issues. This chapterwill attempt to contribute to distributional issues in Jordan through the elaboration of a theoretical framework that will help the reader understand the interlinked and complex relationships that affect the distri-bution of income in general. By now it is well known that the classical 35 36 Determinants of Inequality in Economic Development doctrine, which stated that the primary solution to poverty and inequality of distribution was economic development, has been challenged by recent empirical evidence suggesting that inequality of income is increasing rather than decreasing, even in countries with rapid development. Although the Distribution of Income has become an integral part of economic theory, the economist can hardly play the role of sociologist and political scientist. Yet in addressing the issue of income distribution as an economic problem, the economist cannot ignore the role of noneconomic variables and must search for some tentative propositions that can be further tested by economists and noneconomists alike. This choice is dictated as much by the magnitude and importance of the problems as by the availability of relevant information.
- R. Albert Berry(Author)
- 2019(Publication Date)
- Routledge(Publisher)
Secondly, it reviews earlier studies dealing with the deter-minants of income distribution, to provide a better backdrop to the discussion of subsequent chapters and to show how they relate to prior work. The study of income distribution may be conveniently catalogued into three 1 2 R. A. BERRY AND R. SOLIGO steps. The first involves the measurement of inequality, including both the con-ceptual issues of what different indicators or sets of indicators are capable of measuring and the practical problems relating to data collection and use. A second is the study of the correlates of personal and/or family incomes, such as education, wealth, and occupation. Such studies are necessary to pave the way for the third and ultimately policy relevant type of study, involving the way in which changes in the structure of the economy or of government policy affect income distribu-tion. To illustrate the relevance of each step consider the question of how an increase in public subsidies to higher education would affect distribution. The analyst might first decide that the relevant measure of inequality was the distri-bution of annual income (rather than of lifetime or monthly income). He would then face the difficulties involved in the accurate measurement of annual income of the members of the group in which he was interested, and of the existing rela-tionship of income to level of education. Finally, a model of the economy designed to predict how a change in the relative supply of higher education would affect relative earnings for each person would be needed. Normally one would assume that an increase in the relative supply of higher education would lower its relative earnings, but the model would be required to predict by how much. In this chapter we address each of these three areas. Although our ultimate interest is the prediction of how policy and/or structural change affects the dis-tribution of welfare, the first two steps are necessary preludes.
eBook - PDFThe German Inflation 1914-1923
Causes and Effects in International Perspective
- Carl-Ludwig Holtfrerich, Theo Balderston(Authors)
- 2013(Publication Date)
- De Gruyter(Publisher)
2 In the interim many factors were affect-ing the income distribution: the changed role of the trade union movement, changes in the tax system, the increasing importance of state transfer pay-ments, changes in Germany's external economic relations, and so on. Never-theless the inflation may be credited with the primary responsibility for the distributional changes that occurred. Indeed it may be stated that the latent purpose of inflation is always to effect such a reDistribution of Income and wealth from creditors as will make it possible either for the state or for parti-cular private interests, which under stable prices would not possess the re-quisite means, to realize a desired rate of consumption or investment spending. The functional Distribution of Income Bourgeois economists 3 as well as Marxian theorists habitually reduce in-dustrial societies to only two classes - capitalists and workers. Wage and salary earners - the main constituents of the latter class - are perhaps suffi-ciently alike in their supplier status on the market for labor, and in the parti-cular contractual forms of the employments from which they derive their incomes, to be considered as a unit, despite the vast income differentials that divide them. However I question whether a study of the distributional conse-2 Statistisches Reichsamt: Das deutsche Volkseinkommen vor und nach dem Kriege. Eiwçelschriften ur Statistik des Deutschen Reichs, Nr. 24 (Berlin, 1932). 3 Neoclassical textbooks also normally decompose national income into only wages and profits. E.g. Ernst Heimstätter: Wirtschaftstheorie, Bd. 2 (Munich, 1976), pp. 227-240. Cp. C.E. Fer-guson: The Neoclassical Theory of Production and Distribution (Cambridge, 1969), pp. 215 ff. More generally on the theory of distribution, see Martin Bronfenbrenner: Income Distribution Theory (London, 1971).
eBook - PDFMicroeconomics
Principles and Policy
- William Baumol, Alan Blinder(Authors)
- 2015(Publication Date)
- Cengage Learning EMEA(Publisher)
There is a particular, and well-justified, concern that the real earnings of wage earners at and below the middle of the dis-tribution have fallen further and further behind the wages at the top. These trends toward widening wage and income disparities have been proceeding for about 35 years now. But income inequal-ity has captured increasing public attention recently, especially after the publication of French economist Thomas Piketty’s book, Capital in the Twenty-First Century , which was a runaway best-seller in 2014. Comparing the United States with other countries is much more difficult because no two nations use precisely the same defini-tion of income distribution. The Luxembourg Income Study is the leading international effort to produce comparable data for many countries. In its latest comparison of the income distributions of high-income (mostly European) countries in 2010, the Netherlands and Finland had the most equal income distributions, with Germany and Ireland close behind. The United States and Israel stood out as having the most inequality among the rich countries. Thus, it appears that The United States has more income inequality than most other indus-trialized countries. 20-3 SOME REASONS FOR UNEQUAL INCOMES Let us now begin to formulate a list of the causes of income inequality. Here are some that come to mind. Differences in Ability Everyone knows that people have different capabilities. Some can run faster, ski better, type more accurately, improvise on their computers better, and so on. Hence, it should not be surprising that some people are more adept at earning income. Precisely what sort of ability is relevant to earning income has been a matter of intense debate among economists, sociologists, and psychologists for decades. The tal-ents that make for success in school have some effect, but hardly an overwhelming one. The same is true of innate intelligence—“IQ” (see the box, “How Important Is the Bell Curve?”).
- D. Papadimitriou(Author)
- 2006(Publication Date)
- Palgrave Macmillan(Publisher)
Especially in the United States, notwithstanding Government Effects on the Distribution of Income: An Overview 5 the robust economic growth, inequality has been distinctly higher. Yet if economic growth does not improve the human condition, then there is an expectation that modern society's redistributive policies have a positive impact on the level and distribution of household economic well-being together with an improvement in inequality. However, estimating the impact of the distributional effects of government policies is in itself a difficult task. Part I of this book deals with public sector redistributive effects in the United States and opens with Wolff and Zacharias (Chapter 2). They note that the last study to measure the net effect of government expenditures and taxes on economic well-being was for the year 1970, more than three decades ago, in contrast to a significant number of theoretical papers published on the topic. 3 Traditionally, the Census Bureau has provided estimates of extended measures of disposable income reflecting the effects of taxes and transfer payments. Wolff and Zacharias argue that these measures do not represent an accurate estimate of economic well-being, which to them is defined as 'the magnitude of the command or access of the household over the products produced.' The proper measures of well-being—aside from various transfers between the state and households that include direct and indirect taxation—need to account for expenditures such as schooling and physical infrastructure among other things. That is, public consumption is in general attributable for the benefit of households and provided by the state. In addition, income must somehow include the employer contribution for various benefits and the imputed value from home and non-home wealth. In their analysis, Wolff and Zacharias proceed to construct two estimates of income, which they label 'pre-fiscal' and 'post-fiscal' income, respect- ively.
No longer available |Learn more- William Baumol, Alan Blinder, John Solow, , William Baumol, Alan Blinder, John Solow(Authors)
- 2019(Publication Date)
- Cengage Learning EMEA(Publisher)
For this reason, the market has been widely criticized for centuries for doing a rather poor job of distributing income in accord with commonly held notions of fairness and equity. On balance, most observers feel that both the praise and the criticism are justified: The market mechanism is extraordinarily good at promoting efficiency but not very good at promoting equality. As we said at the outset, the market has both virtues and vices. 1. The United States declared a “War on Poverty” in 1964, and within a decade the fraction of families below the official poverty line had dropped substantially. But today, the poverty rate is higher than it was in the 1970s. 2. In the United States today, the richest 20 percent of households receive more than 50 percent of the income, whereas the poorest 20 percent of households receive only about 3 percent. These numbers reflect a consid-erable increase in inequality since about 1980. The U.S. income distribution also appears to be more unequal than those of most other industrial nations. 3. Individual incomes differ for many reasons. Differences in natural abilities, in the desire to work hard and to take risks, in schooling and experience, and in inherited wealth all account for income disparities. Economic discrimination also plays a role. All of these factors, however, explain only part of the inequality that we observe. A portion of the rest is due simply to good or bad luck, and the balance is unexplained. 4. There is a trade-off between the goals of reducing inequality and enhancing economic efficiency. Namely, policies that help on the equality front normally harm efficiency, and vice versa. 5. Because of this trade-off, there is, in principle, an optimal degree of inequality for any society.
eBook - PDFChina's Economic Growth: Towards Sustainable Economic Development and Social Justice
Volume II: The Impact of Economic Policies on the Quality of Life
- John Joshua(Author)
- 2017(Publication Date)
- Palgrave Macmillan(Publisher)
77 © The Author(s) 2017 J. Joshua, China’s Economic Growth: Towards Sustainable Economic Development and Social Justice, DOI 10.1057/978-1-137-59435-8_4 4 The Distribution of Income 4.1 Introduction This chapter discusses the Distribution of Income in China and begins with an analysis of the relationship between income and economic growth using the Kuznets Curve as an illustration. The Kuznets Curve assumes that as economic growth proceeds, differences in income first increase and eventually begin to fall; that is, differences in income eventually nar- row, so that most people come to benefit from economic growth. However, income in virtually all developed countries has not risen as fast at the lower levels than at the upper income level, so that the dis- persion of income distribution has widened. Much the same applies to China: the Gini coefficient between the lower and the higher income groups has widened, especially between the rural and the urban areas. The result is that inequality has increased, even though over 480 million people have been lifted out of absolute poverty since the beginning of the reforms in 1978. Whereas the purchasing power of the lower wage earn- ers has actually declined in most Western countries, the income at the lower end amongst Chinese workers has increased recently. This has been the result of deliberate action by the Chinese government to develop a xiaokang (moderately prosperous) society and to direct the country’s eco- nomic growth to promote a consumer-oriented society. There are various lessons that can be learned by emerging countries from China’s growth experience since 1978. The increasing disparity in income between the urban and the rural sectors can also provide some lessons. An understanding of the causes of the increase in inequality may contribute towards a reduction of such inequality.
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