Economics
Market Distribution of Income
Market distribution of income refers to the way in which income is divided among individuals or households within a market economy. It reflects the unequal distribution of income across different segments of the population, often resulting in income inequality. This distribution is influenced by factors such as wages, profits, and government policies.
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8 Key excerpts on "Market Distribution of Income"
eBook - ePub- Harlan M. Smith(Author)
- 2016(Publication Date)
- Routledge(Publisher)
It is not the intent of this brief discussion that economists need to become ethicists also, or that the principles of economics textbooks need to give a full and adequate treatment to the ethics of the distribution of income and wealth, but that at least some brief discussion is needed to make students aware that the usual textbook marginal productivity theory of distribution cannot properly be taken as automatic, sole, and sufficient justification for its being treated as normative. It does not suffice simply to say so in so many words, because it is likely to be taken as a norm unless at least a few of its difficulties are presented. And since distribution is so important to everybody, and such concepts as the ability concept tend to be tied to the marginal productivity concept, a word about such is also needed to stimulate students to think about parts of accepted ideology—not to provide a different normative answer, but to disabuse them of the notion that economics has given a definitive answer to a question that involves a variety of ethical issues.25. More on the Distribution of Income and Wealth
The marginal productivity theory of distribution deals only with the functional distribution of income by purportedly explaining the pricing of productive services in the factor of production markets. That pricings however done and explained, is only the first step in determining the income of any person, household, or family. The textbooks usually say that that income, the personal or size distribution of income, is determined by the pricing of productive services and the distribution of ownership of such productive services. And so it is. But there is no textbook explanation of the distribution of ownership of productive services, as important as that is. The reason for the omission is that there is no economic theory to explain it. Only history explains it, that is, describes its evolution. Clearly it is partly a result of the operation of an economy over time, the results cumulating. As popular ideas have it, not incorrectly, it takes money to make money, so to some extent inequality tends to grow. “Shirtsleeves to shirtsleeves in three generations,” another popular saying, indicates that excess stupidity can crop up in any family line at times. It can happen, but even moderate prudence would enable the wealthy to become wealthier if their gambles were confined to half their wealth while the rest was invested safely at compound interest. Clearly in an economy of rapid and to some extent unforeseeable change, riches to rags, rags to riches, and other changes in the distribution of income and wealth can come about through the impact of change on the distribution of ownership of productive resources.
eBook - PDFEconomics
Principles & Policy
- 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.
- Sebastian Vollmer(Author)
- 2018(Publication Date)
- Peter Lang International Academic Publishers(Publisher)
Essay 3 Income Distribution Dynamics and Pro-Poor Growth 3.1 Introduction Over the past decade increased attention has been given to the evolution of global income in-equality and the connected questions of global welfare and poverty development. In the light of an ever intensifying globalization of the world economy, a rising concern is to identify global and regional winners and losers of this process. From a welfare point of view, the question might not be whether globalization generated economic growth per se, but rather how pro-poor this growth was or in other words which section of the global income distribution benefited most from the relatively successful global growth record of the past decades. Recent papers model the global income distribution, or a distribution limited to major economic players, by taking into account the underlying national income distributions (Dowrick and Ak-mal, 2005; Milanovic, 2002; Chen and Ravallion, 2004; Chotikapanich et al., 1997; Bourguignon and Morrisson, 2002; Quah 2002; Bhalla, 2002; Sala-i-Martin, 2006). In fact, an objective way to construct the global income distribution from the distinct national income distributions is as a population weighted finite mixture of the national income distributions. Intuitively, if one picks at random an individual with a certain income from this global income distribution, one first randomly draws the country it comes from (with probability equal to that countries proportion of the world population), and then obtains its income from the corresponding country income distribution. The main task in this approach is to determine the national income distributions. A debate continues concerning the data sources on which estimates of the income distributions should be based. Two main concepts have been used so far. The first approach, labeled Con-cept 2 by Milanovic (2006), combines national accounts income data with household survey inequality data to derive a global income distribution.
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 - PDF- John Leach(Author)
- 2003(Publication Date)
- Cambridge University Press(Publisher)
It is followed by two chapters which discuss income redistribution in economies in which the second theorem does not ap-ply. Chapter 24 shows how the adjustments that people make to redistributive policies increase the cost of redistribution, and ultimately limit the amount of redistribution that can occur. Chapter 25 looks at two kinds of policies (tagging and targeting) that moderate these adjustments, allowing more redistribution to occur, or the same amount of redistribution to occur with a smaller loss of efficiency. 23 The Distribution of Income Each person’s welfare under the market system is determined by three factors: • Tastes and needs. Some people, such as the disabled and the chronically ill, need to consume large quantities of goods and services to maintain even a moderate level of economic welfare. On the other hand, healthy and free-spirited individuals might be quite content with few material possessions. • Prices. Given his income, each person can buy more goods and services when prices are lower, and therefore prefers low prices to high prices. A fall in any given price, however, will impact each person to a different degree. A reduction in the price of prescription drugs, for example, will have little effect on the welfare of the healthy, but will greatly impact the chronically ill. • Income. At given market prices, each person can afford to buy more goods and services when his income is higher. Differences in these three factors across the population lead to disparities in economic welfare. 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.
eBook - PDFPublic Expenditures, Taxes, and the Distribution of Income
The United States, 1950, 1961, 1970
- Morgan Reynolds, Eugene Smolensky(Authors)
- 2013(Publication Date)
- Academic Press(Publisher)
This led Cannan (Prest 1955, p. 244) justifiably to comment in 1927 that such a statistical inquiry is a will-o-the-wisp and absolutely useless. In practice, analysts assume that the distribution of pretax market incomes would be no different if government were zero. The weakness of this interpretation hardly needs pointing out. The conceptual bases of the three other alternatives we have discussed are stronger. Their empirical content, however, is no greater. Cases II and III depend critically upon knowing the pattern of benevolence in an economy of millions of individuals. Presumably, government ignores malevolent feel-ings of its citizen consumers, and only taxes and transfers in response to charitable demands. Even so, knowledge of the size and pattern of an effi-cient government tax and expenditure scheme is unattainable. The case IV definition fares as poorly. What constitutes an optimum distribution or the best initial distribution is, of course, conceptually unknown and certainly cannot then have an empirical representation. If this problem had been resolved by now, welfare economics would no longer have a question to investigate. 24 Alternative Definitions of Income Redistribution The burden of this chapter has been to show that it is not sensible to try to discover the aggregate redistributive impact of government in a given year by assigning burdens and benefits to income classes in the conventional way. Subsequent chapters, therefore, will trace changes in the size distribu-tion of income over time, when income is defined to include the benefits and burdens of government at all levels. To pursue this objective we estimate the distribution of final output using comparable incidence assumptions for each year but with the new amounts of income, taxes, and expenditures for each year.
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.
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).
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