Distribution (economics)

This article is about distribution in economics. For other uses, see Distribution.

Distribution in economics refers to the way total output, income, or wealth is distributed among individuals or among the factors of production (such as labour, land, and capital).[1] In general theory and the 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[2] and measuring their respective shares, as in National Income. 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 y percent, and so forth (say in quintiles), and on the factors that might affect them (globalization, tax policy, technology, etc.).

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.[3][4][5][6] Analysis applies to not only capital and land but the distribution of income in labor markets.[7]

The neoclassical growth model provides an account of how distribution of income between capital and labor are 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.[8] More recent developments of the distinction between human capital and physical capital and between social capital and personal capital have deepened analysis of distribution.


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

See also

Median household income (simplest measure of relative and absolute in income distribution)
Income quintiles (from the top 20% on down for the U.S.)
Household income in the United States
Personal income in the United States
Gini coefficient
Lorenz curve

Distribution of what?

Distribution theories

Classical distribution theory

Marxian distribution theory

Neoclassical distribution theory

Normative economics of distribution

Distributive justice
Justice (economics)
Social choice theory
Social welfare function


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 The New Palgrave: A Dictionary of Economics (1987):

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


  1. Paul A. Samuelson and William D. Nordhaus (2004). Economics, 18th ed., [end] Glossary of Terms, "Distribution."
  2. "Glossary "Factor income"". Bureau of Economic Analysis, U.S. Department of Commerce. 2 October 2006. Retrieved 2010-11-09.
  3. John Bates Clark (1902). The Distribution of Wealth. Analytical Table of Contents).
  4. Philip H. Wicksteed (1914). “The Scope and Method of Political Economy in the Light of the ‘Marginal’ Theory of Value and Distribution," Economic Journal, 24(94), pp. 1-23.
  5. George J. Stigler (1941). Production and Distribution Theories: The Formative Years (analytical exposition of successive contributions by ten neoclassical economists from about 1870 to 1910). New York: Macmillan. Chapter-preview links.
  6. C.E. Ferguson (1969). The Neoclassical Theory of Production and Distribution. Cambridge. Description & review excerpt.
  7. J.R. Hicks (1932, 2nd ed., 1963). The Theory of Wages. London: Macmillan.
  8. F.H. Hahn (2008). "neoclassical growth theory," The New Palgrave: A Dictionary of Economics. Abstract.

External links

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