ABSTRACT

Economists measure the distribution of income in two ways: the functional distribution of revenue or the size of the distribution of earnings. Functional distribution is older in economic theorizing as it appears in the classical notion of income shares to different economic classes. 1 Within the general framework of the classical model, classes are broadly defined by their private property relations in the production process of capitalist market economies. Workers own their laboring capacity and receive wages (W), landlords own non-produced and non-reproducible (‘land’) inputs and receive rent (R), and capitalists own the produced means of production and receive profits (Z); more advanced models include in the profit relation the interest rate and the role of finance generally. In aggregate, the sum of these distributed revenues is equal to the total national income:

National income (Y) = Wages (W) + Rents (R) + [Profits (Z) + Interest (i)]