Method in which total output and wealth are distributed in an economy
This article is about resource distribution in economic theory. For distribution of products, see
Distribution (marketing). For other uses, see
Distribution.
In
economics, distribution is the way total
output, income, or
wealth is distributed among individuals or among the
factors of production (such as
labour,
land, and
capital).[1] In general theory and in for example the U.S.
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[2] 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 x percent, and so forth (defined by equally spaced cut points, say
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
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.[3][4][5][6] Analysis applies to not only capital and land but the distribution of income in labor markets.[7]
The
neoclassical growth model provides an account of how the distribution of income between capital and labor is 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.[8] More recent developments of the distinction between
human capital and
physical capital and between
social capital and personal capital have deepened analysis of distribution.
^"Glossary "Factor income"". Bureau of Economic Analysis, U.S. Department of Commerce. 2 October 2006. Archived from
the original on 12 June 2018. Retrieved 2010-11-09.
^George J. Stigler (1941). Production and Distribution Theories: The Formative Years (analytical exposition of successive contributions by ten
neoclassical economists from about 1870 to 1910). New York: Macmillan. Chapter-preview
links.
^C.E. Ferguson (1969). The Neoclassical Theory of Production and Distribution. Cambridge.
Description & review
excerpt.
Gary S. Becker (1993). Human Capital: A Theoretical and Empirical Analysis, with Special Reference to Education (3rd ed.). University of Chicago Press.
ISBN978-0-226-04120-9.
(UCP descr)
Sheldon Danziger and Peter Gottschalk (1995). America Unequal, Harvard University Press, Cambridge, MA
ISBN0-674-01810-9(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.