Income distribution refers to how the total GDP of a nation is distributed among its population. Distribution of income has always been a concern of the economic policy and economic theory. Classical economics like Thomas Malthus, David Ricardo and Adam Smith concerned themselves with various income distribution factors. Such factors include income distribution between the major production factors, labor, capital and land.
This issue has also been addressed by modern economists. However, modern economists are more concerned with how income is distributed across households and individuals. Essential policy and theoretical concerns include how economic growth and income inequality relate.
Lorenz curve is commonly used to represent income distribution with communities. This curve is associated closely with income inequality measures such as Gini coefficient.
Inequality concept is distinct from poverty concept and fairness. Social scientists use the metrics of income inequality in measuring income distribution and economic inequality of the participants in a given economy. Such economies include those of a given country or of the entire world. Although different theories attempt to explain the causes of income inequality, metrics of income inequality provide a measurement system that is used in determining incomes dispersion.
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There are various factors that cause income distribution as well as levels of inequality or equality. Such factors include economic policies, tax policies, policies of labor unions, labor market, monetary policies, automation and technology, individual workers abilities, globalization, culture, race, gender and education.
Various organizations such as the Central Intelligence Agency and the United nations have been able to measure the income inequality of countries using Gini coefficients. According to the standard economic theory, inequality increases with development of a country. This inequality decreases with attainment of a certain average of income and it is represented by a theory that is commonly called Kuznets curve.
Nevertheless, many economists have disagreed over the need for increasing inequality to enhance development in a country. Additionally, empirical data conflict the proclaimed decrease after the inequality.
Generally, achieving equal income distribution is almost impossible. If every individual in the society earns the same income, then there is a perfect equal distribution of income. If only one person earns income in a country, then there is a perfectly unequal income distribution. In every society, income distribution is usually between equal and unequal.
To determine income distribution, economists consider the amount of income that different segments in a population earn. In political economics, income distribution is a major and enduring issue.
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