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Distribution (economics)

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). 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 and measuring their respective shares, as in . 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.).

History

Distribution has been central in the study of political economy since the 19th century, as shown in scholarship by Adam Smith, David Ricardo, and John Stuart Mill.

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.

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. More recent developments of the distinction between human capital and physical capital and between social capital and personal capital have deepened analysis of distribution.

Statistics

Vilfredo Pareto proposed the distribution of income can be described by a power-law: this is now called the Pareto distribution.

See also

Distribution of what?

Distribution theories

Classical distribution theory

Marxian distribution theory

Neoclassical distribution theory

Normative economics of distribution

Notes

References

ch. 12: How Markets Determine Incomes
ch. 13: The Labor Market
ch. 14: Land and Capital
ch. 14: Appendix Markets and Economic Efficiency .

Some distribution entries from ' (1987):

  • "distribution, law of," v. 1, pp. 869–72, by J.B. Clark [1926].
  • "distribution theories, classical," v. 1, pp. 872–76, by Luigi Pasinetti.
  • "distribution theories, Keynesian," v. 1, pp. 876–78, by .
  • "distribution theories, Marxian," v. 1, pp. 878–83, by David M. Gordon.
  • "distribution theories, neoclassical," v. 1, pp. 883–86, 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.

Some distribution entries from The New Palgrave Dictionary of Economics (2008), 2nd Ed.:

External links