Income distribution

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Income distribution
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• Income distribution whats that?
• Income distribution within the word.
• Income distribution within the country.
• Income redistribution and transfer payments.
• Difference between the functional and personal
  income distribution.

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Income distribution within the world
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Income distribution- how the income is divided
between people or groups of people.
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Importance of income distribution

• Indicates the wealth of the society
• Indicates what is the current state of economy.

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National income- sum of the incomes of all the
citizens of the given country.
World income- sum of all countries incomes.
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www.melissaho.com/research/world_income.php
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Source of data World Development Report, 1996
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Why such differences?

• Poor countries - little machines -
  people not professionally trained - poor
  working conditions
• Rich countries -just the opposite

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World economy produces
For whom?
For 15 worlds population living in rich
countries.
What?
Goods services consumed by the rich countries.
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Conclusions

• When considering the income distribution within
  the word, a great percentage of peope live in
  incredible poverty.
• Not everyone in the country gets the average
  income. Even in the middle- income countries many
  people live in great poverty.

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Nationalincome

• National income - sum of the incomes of all the
  citizensof the given country.

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Lorentz Curve

• It is often used to represent income
  distribution, where it shows for the bottom x of
  households, what percentage y of the total
  income they have. The percentage of households is
  plotted on the x-axis, the percentage of income
  on the y-axis.

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Gini coefficient

• The Gini coefficient is a measure of inequality
  of a distribution, defined as the ratio of area
  between the Lorentz curve of the distribution and
  the curve of the uniform distribution, to the
  area under the uniform distribution.

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What differs income distribution within the
country from income distribution within the
world is

• Income comes also from ownership of assets
• (rent, dividends, interest payments)

• Societies can change the income distribution
• ( state-owned economy or private-ownership
• economyposiibility of government intervention
• in the economy)

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State-owned economy -high degree of equality of
income
Private ownership economy -ownership, power and
wealth concentrated in the hands of small group
of people
Govenrment intervention in economy -by levying
higher taxes on high incomes which reduces
concentration of wealth
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The income is not equally distributed within
the country to various extent
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Income redistribution transfer payments
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Income redistribution means that the government
affects the income distribution generated by the
market.
Transfer payments are the payments for which no
current direct economic service is provided in
return
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• Examples of income redistribution done by means
  of transfer payments
• - Social security (towards the elderly)
• - Unemployment benefits (towards the unemployed)
• - Price supports (towards the farmers).

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• Merit goods are goods that society thinks people
  should consume or receive, no matter what their
  incomes are.

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Why decisions concerning the income
redistribution are so hard? Try to find the
compromise between The more even the
distribution of income the better.
People who work harder should be rewarded
People who need more should get more
Everyone should have a descent housing, no one
should starve
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Functional and personal income distribution
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Functional income distribution

• It shows how national income is divided between
  the factors of production.
• The share of each factor can remain quite
  constant over time.

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Personal income distribution

• It shows how national income is divided between
  different individuals regardless of the factor
  services from which income is earned.

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The End
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Presentation was prepared by

• Joanna Kacprzyk
• Beata Kaminska
• Marta Walczak
• Kamila Grabowska