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In economics, income distribution covers how a country's total GDP is distributed amongst its population. [1] Economic theory and economic policy have long seen income and its distribution as a central concern. Unequal distribution of income causes economic inequality which is a concern in almost all countries around the world. [2] [3]
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.
Income distribution has always been a central concern of economic theory and economic policy. Classical economists such as Adam Smith, Thomas Malthus and David Ricardo were mainly concerned with factor income distribution, that is, the distribution of income between the main factors of production, land, labour and capital.
The relative income hypothesis was developed by James Duesenberry in 1949. It consists of two separate consumption hypothesis. It consists of two separate consumption hypothesis. The first hypothesis states that an individual's attitude to consumption is dictated more by their income in relation to others than by an abstract standard of living .
To attain an efficient allocation of resources with the desired distribution of income, if the assumptions of the competitive model are satisfied by the economy, the sole role of the government is to alter the initial distribution of wealth [11] – the major drivers of income inequality in capitalist systems – was virtually nonexistent; and ...
In economics, the wage share or labor share is the part of national income, or the income of a particular economic sector, allocated to wages . It is related to the capital or profit share, the part of income going to capital, [1] which is also known as the K–Y ratio. [2] The labor share is a key indicator for the distribution of income. [3]
Until A Theory of Consumption Function, the Keynesian absolute income hypothesis and interpretation of the consumption function were the most advanced and sophisticated. [2] [3] In its post-war synthesis, the Keynesian perspective was responsible for pioneering many innovations in recession management, economic history, and macroeconomics.
The horizontal axis shows the inequality, measured by a country’s Gini coefficient (a higher value means a more unequal distribution of income in society). The vertical axis shows persistence, measured by the intergenerational elasticity of income (IGE), where a lower intergenerational elasticity means there is higher income mobility in that ...