Income distribution

In economics, income distribution covers how a country's total GDP is distributed amongst its population. 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.

Classical economists such as Adam Smith (1723–1790), Thomas Malthus (1766–1834), and David Ricardo (1772–1823) concentrated their attention on factor income-distribution, that is, the distribution of income between the primary factors of production (land, labour and capital). Modern economists have also addressed issues of income distribution, but have focused more on the distribution of income across individuals and households. Important theoretical and policy concerns include the balance between income inequality and economic growth, and their often inverse relationship.

The Lorenz curve can represent the distribution of income within a society. The Lorenz curve is closely associated with measures of income inequality, such as the Gini coefficient. World Bank lists 118 countries based on consumption inequality compared to 68 countries based on income inequality.

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.

Gini Coefficient: A measure that represents the income or wealth distribution among a nation's residents, with 0 expressing perfect equality and 1 indicating perfect inequality. Lorenz Curve: A graphical representation of income distribution, where a perfectly straight line (45-degree line) reflects absolute equality. Quintile and Decile Ratios: These divide the population into equal parts (quintiles - fifths, deciles - tenths) to compare the income shares received by each group.

Various economic theories address income distribution, from classical economics, which tends to focus on market mechanisms, to Keynesian economics, which emphasizes the role of government intervention. Policies to influence income distribution include:

Progressive Taxation: Taxing higher incomes at higher rates to redistribute income more evenly. Public Spending: Directing government expenditure towards education, healthcare, and social security to support lower-income groups. Wage Policies: Implementing minimum wage laws and encouraging collective bargaining to improve wages for low- and middle-income workers. International Perspectives on Income Distribution Income distribution varies greatly around the world. Comparing countries through tools like the World Income Inequality Database (WIID) or the Standardized World Income Inequality Database (SWIID) can provide insights into global patterns and the effectiveness of different policies.

Trends and Current Data Recent trends in income distribution show increasing income inequality in many parts of the world. This trend has been exacerbated by globalization and changes in the global economy. Current data from sources like the OECD can be used to update the article with the latest figures and trends.