Distribution in economics refers to the way total output or income is distributed among individuals or among the factors of production (labor, land, and capital) (Samuelson and Nordhaus, 2001, p. 762). In general theory and the national income and product accounts, each unit of output corresponds to a unit of income. One use of national accounts is for classifying factor incomes and measuring their respective shares, as in National Income. But, where focus is on income of persons or households, adjustments to the national accounts or other data sources are frequently used. Here, interest is often on the fraction of income going to the top (or bottom) x percent of households, the next y percent, and so forth (say in quintiles), and on the factors that might affect them (globalization, tax policy, technology, etc.).
Descriptive, theoretical, scientific, and welfare uses
Income distribution can describe a prospectively observable element of an economy. It has been used as an input for testing theories explaining the distribution of income, for example human capital theory and the theory of economic discrimination (Becker, 1993, 1971).
In welfare economics, a level of feasible output possibilities is commonly distinguished from the distribution of income for those output possibilities. But in the formal theory of social welfare, rules for selection from feasible distributions of income and output are a way of representing normative economics at a high level of generality.
Neoclassical distribution theory
In neoclassical economics, the supply and demand of each factor of production interact in factor markets to determine equilibrium output, income, and the income distribution. Factor demand in turn incorporates the marginal-productivity relationship of that factor in the output market. Analysis applies to not only capital and land but the distribution of income in labor markets (Hicks, 1963). In a perfectly competitive economy, market equilibrium results in allocative efficiency as to the mix of output produced and distributive efficiency in the least-cost mix of factors of production. In 1908, the efficiency properties of perfect competition were shown by Enrico Barone to be required as well for efficient resource use in collectivist planning.
The neoclassical growth model provides an account of how distribution of income between capital and labor are determined in competitive markets at the macroeconomic level over time with technological change and changes in the size of the capital stock and labor force. More recent developments of the distinction between human capital and physical capital and between social capital and personal capital have deepened analysis of distribution.
See also
- Median household income (simplest measure of relative and absolute in income distribution)
- Income quintiles (from the top 20% on down for the U.S.)
- Household income in the United States
- Personal income in the United States
- Gini coefficient
- Lorenz curve
Distribution of what?
Distribution theories
Classical distribution theory
Marxian distribution theory
Neoclassical distribution theory
- Distributive justice
- Justice (economics)
- Social choice theory
- Social welfare function
References
- A.B. Atkinson and F. Bourguignon, ed. (2000). Handbook of Income Distribution, v. 1. Elsevier.table of contents
- _____ (2001). "Income Distribution," International Encyclopedia of the Social & Behavioral Sciences, pp. 7265-7271. Abstract.
- Gary S. Becker (1971, 2nd ed.). The Economics of Discrimination. University of Chicago Press. ISBN 0-226-04115-8. (UCP descr)
- Gary S. Becker (1993, 3rd ed.). Human Capital: A Theoretical and Empirical Analysis, with Special Reference to Education.. University of Chicago Press. ISBN 978-0-226-04120-9. (UCP descr)
- John Bates Clark (1902). The Distribution of Wealth (analytical Table of Contents)
- Sheldon Danziger and Peter Gottschalk (1995). America Unequal, Harvard University Press, Cambridge, MA ISBN-0-674-01810-9 (book abstract)
- Sheldon Danziger, Robert Haveman, Robert Plotnick (1981). "How Income Transfer Programs Affect Work, Savings, and the Income Distribution: A Critical Review," Journal of Economic Literature 19(3), pp. 975-1028. JUSTOR
- Milton Friedman and Simon Kuznets (1945). Income from Independent Professional Practice NBER.
- John R. Hicks (1932, 2nd ed., 1963). The Theory of Wages. London: Macmillan.
- Julian Lamont (2003). "Distributive Justice", Stanford Encyclopedia of Economics.
- Gian Singh Sahota (1978). "Theories of Personal Income Distribution: A Survey", Journal of Economic Literature, 16(1), pp. 1-55.
- Xavier Sala-Martin (2006)."The World Distribution of Income: Falling Poverty and… Convergence, Period,"(+ button to enlarge), Quarterly Journal of Economics," 121(2), May, pp. 351-397.
- Paul A. Samuelson and William D. Nordhaus (2004). Economics, 18th ed.,
- ch. 12: How Markets Determine Incomes
- ch. 13: The Labor Market
- ch. 14: Land and Capital
- ch. 14: Appendix Markets and Economic Efficiency .
The following are some distribution entries from The New Palgrave: A Dictionary of Economics (1987):
- "distribution, law of," v. 1, pp. 869-72, by J.B. Clark [1926].
- "distribution theories, classical," v. 1, pp. 872-876, by Luigi Pasinetti.
- "distribution theories, Keynesian," v. 1, pp. 876-78, by Mauro Baranzini.
- "distribution theories, Marxian," v. 1, pp. 878-883, by David M. Gordon.
- "distribution theories, neoclassical," v. 1, pp. 883-886, by Christopher Bliss.
- "distributive justice," v. 1, pp. 886-88, by Edmund S. Phelps.
- "imputation," v. 2, pp. 838-39, by Murray N. Rothbard.
- "inequality between persons," v. 2, pp. 821-24, by Anthony F. Shorrocks.
- "interest and profit," v. 2, pp. 877-79, by Carlo Panico.
- "marginal productivity theory," v. 3, pp. 323-25, by Robert F. Dorfman.
- "Marxian value analysis," v. 3, pp. 383-87 by J.E. Roemer.
- "profit and profit theory," v. 3, pp. 1014-21, by Meghnad Desai.
- "wages, real and money," v. 4, pp. 840-42, by Henry Phelps Brown.
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