Income Distribution

Last updated Sep 12, 2023 Edit Source

Stock: A quantity measured at a fixed period of time, e.g. wealth, GDP, inventories Flow: A quantity which is measured with reference to a period of time, e.g. income

• The receipt of spending power by persons.
• May be productive or non-productive
• Productive income: A reward to the factors of production
• Non-productive income (transfer income): Received from the Government by persons as cash social serve benefits such as pensions

• Income earnt as an employee/self-employed person

• Private income plus government transfer payments

• Gross income minus tax

• Disposable income and any indirect government benefits

• Is a stock variable
• Refers to the stock of assets held, such as land, houses, shares, cars, money, minus the liabilities including mortgage, bank loans

• A situation where people live below a subsistence level of income

• Is a measure of the unevenness in income distribution within a population
• Can be illustrated using the Lorenz curve and represented using the Gini coefficient

• The population is ranked according to their income, from the lowest to the highest income
• If everyone received the same income, the Lorenz curve would be straight

• Measure the degree of income inequality in a country
• $0 <= x <= 1$
• 0 = income equality, 1 = absolute inequality
• The area between the diagonal and the Lorenz curve

• Personal traits e.g. personalities and talents
• Occupational conditions e.g. training, education and responsibilities
• Opportunities
• Other factors e.g. sickness, disabilities and luck

• Direct taxation: Personal income tax is progressive
• Transfer payments: Cash support for different groups
• Indirect government payments: Social transfers increase access to basic services