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

Expert Answers

An illustration of the letter 'A' in a speech bubbles

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.

Approved by eNotes Editorial Team
An illustration of the letter 'A' in a speech bubbles

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.

Approved by eNotes Editorial Team
Soaring plane image

We’ll help your grades soar

Start your 48-hour free trial and unlock all the summaries, Q&A, and analyses you need to get better grades now.

  • 30,000+ book summaries
  • 20% study tools discount
  • Ad-free content
  • PDF downloads
  • 300,000+ answers
  • 5-star customer support
Start your 48-Hour Free Trial