What is the difference between functional income distribution and personal income distribution?

3 Answers | Add Yours

pohnpei397's profile pic

pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted on

Both of these terms refer to the ways in which income is divided up within an economy.  However, functional income distribution refers to the division between groups of people while personal income distribution refers to the division among individuals.

Functional income distribution measures how much of the income in society goes to the people who own the various kinds of resources.  We know that there are three kinds of resources: land, labor and capital.  Functional income distribution tells us how much of the income in an economy goes to the groups of people who own each of these.  By contrast, personal income distribution simply tells us how much money goes to various individuals, regardless of which of these groups they belong to.

mkoren's profile pic

mkoren | Middle School Teacher | (Level 3) Senior Educator

Posted on

There is a difference between functional income distribution and personal income distribution. Personal income distribution focuses on how income is divided among individuals in a country. It focuses on why there is a difference in the income distribution between different groups or classes of people. From this analysis, policies can be developed to deal with unequal income distribution.

Functional income distribution deals with the amount of income relative to the factors of production. The factors of production are land, labor, capital, and the entrepreneur. Functional income distribution will look at how much rent a piece of land can get. It will look at how much pay a worker receives. It will also examine how much interest comes from the capital that is invested, and how much profit an entrepreneur can make.

There is some connection between these concepts. If functional income distribution is fair, it is likely that this will also be the case with personal income distribution This is generally good for the economy. The reverse would be the case if there was unjust functional and personal income distribution.

economicrimpa's profile pic

economicrimpa | Student, Undergraduate | (Level 1) eNoter

Posted on

personal distribution of national incom means the distribution of national income among various individual in a society. It shows how inequality of income emerge in the country.

on the other hand the theory of functional distributio studies how thw various factor of prodution are rewarded for their service . It studies how price og factors such as rent of land, wages of labour, inerest on capital and profit of entreprenuer are determined. The theory of distribution is concerned with functional distribution of income which is also called theory of factor pricing.

We’ve answered 317,420 questions. We can answer yours, too.

Ask a question