What is personal distribution and functional distribution?
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.
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What is personal distribution and functional distribution?
Personal Distribution:
Personal distribution refers to the distribution of income or wealth among individuals or households. It is concerned with how income and wealth are allocated among individuals based on their personal circumstances, such as their occupation, skills, education, and other factors. Personal distribution examines the level of inequality or equality in the distribution of income and wealth within a society.
Key Points:
- Personal distribution focuses on the individual or household level.
- It considers the various factors that determine the allocation of income and wealth among individuals.
- Personal distribution examines the level of inequality or equality in the distribution of income and wealth.
Functional Distribution:
Functional distribution refers to the distribution of income among different factors of production, namely land, labor, and capital. It examines how the total income generated in an economy is distributed among these factors. In functional distribution, income is categorized based on the role or function performed by each factor of production.
Key Points:
- Functional distribution focuses on the factors of production.
- It analyzes how the total income generated in an economy is distributed among land, labor, and capital.
- Income is categorized based on the role or function performed by each factor of production.
Differences:
The main difference between personal distribution and functional distribution is the unit of analysis. Personal distribution looks at the distribution of income and wealth among individuals or households, while functional distribution focuses on the distribution of income among the factors of production.
Another difference lies in the factors considered. Personal distribution takes into account personal characteristics, such as occupation, skills, and education, whereas functional distribution considers the factors of production, namely land, labor, and capital.
Furthermore, personal distribution examines the level of inequality or equality in the distribution of income and wealth within a society, while functional distribution analyzes how the total income is divided among the factors of production.
In Summary:
- Personal distribution looks at the distribution of income and wealth among individuals or households.
- It considers personal characteristics and examines the level of inequality or equality in the distribution.
- Functional distribution focuses on the distribution of income among the factors of production.
- It categorizes income based on the role or function performed by each factor.
- The key difference lies in the unit of analysis and the factors considered.