Income distribution

Further information: Economic inequality

In economics, income distribution is how a nation’s total GDP is distributed amongst its population.

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.

Modern economists have also addressed this issue, but have been more concerned with the distribution of income across individuals and households. Important theoretical and policy concerns include the relationship between income inequality and economic growth.

The distribution of income within a community may be represented by the Lorenz curve. The Lorenz curve is closely associated with measures of income inequality, such as the Gini coefficient.

Measurement

Main article: Income inequality metrics

The concept of inequality is distinct from that of poverty and fairness. Income inequality metrics (or income distribution metrics) are used by social scientists to measure the distribution of income, and economic inequality among the participants in a particular economy, such as that of a specific country or of the world in general. While different theories may try to explain how income inequality comes about, income inequality metrics simply provide a system of measurement used to determine the dispersion of incomes.

Causes

Main article: Economic inequality

causes of income distribution and levels of equality/inequality include: tax policies, economic policies, labor union policies, monetary policies, the market for labor, abilities of individual workers, technology and automation, education, globalization, gender, race, and culture.

Distribution measurement internationally

Main article: List of countries by income equality

Using Gini coefficients, several organizations, such as the United Nations (UN) and the US Central Intelligence Agency (CIA), have measured income inequality by country.

Trends

Idealized hypothetical Kuznets curve.

Economic inequality tends to increase over time as a country develops, and to decrease as a certain average income is attained. This trend is commonly known as the Kuznets curve after Simon Kuznets.

However, a May 2011 report by OECD stated that the gap between rich and poor in OECD countries (most of which are "high income" economies) "has reached its highest level for over over 30 years, and governments must act quickly to tackle inequality".

Income distribution in different countries

Income distribution in the United States

Main article: Household income in the United States

Further information: Income inequality in the United States

In the United States, income has become distributed more unequally over the past 30 years, with those in the top quintile (20%) earning more than the bottom 80% combined.

See also

• Economic inequality
• Affluence in the United States
• Income inequality metrics
• Kinetic exchange models of markets
• Median household income
• Personal income in the United States
• Poverty in the United States
• Redistribution of wealth

External links

• The Polarization of the U.S. Labor Market, economics.harvard.edu
• U.S. Census Bureau ([1999] 2004). "Income Inequality (1947-1998)." (dead link)
• INTERNATIONAL MONETARY FUND Research Department. Inequality and Unsustainable Growth: Two Sides of the Same Coin? Prepared by Andrew G. Berg and Jonathan D. Ostry1