A Note On the Use of Aggregate Personal Income Data as a Research Tool

Abstract

T IS a common practice in comparative state policy research to use per capita income figures as a measure of economic development. Often employed as a test factor in elaborating observed relationships between politics and policy, per capita income statistics have proved to be a convenient tool of cross-sectional policy analysis. The purpose of this brief note is to encourage certain refinements in the use of aggregate personal income data and to point out some of the conceptual and theoretical advantages of these refinements for future research. What is proposed here is the practice of identifying the component parts or types of personal income in order to treat each component separately in our research. One very promising classification scheme devised by Harvey Perloff and his associates divides personal income into three component parts: participation income, property income, and net transfer payments.? Participation income comprises wages and salaries, other labor income, and proprietor's income. Participation income thus consists largely of income from labor services. Property incomes consist of dividends, interest, and rent payments. These depend primarily upon the pattern of ownership of capital, which at any given moment is historically determined. 2 Net transfer payments include payments such as pension and relief which are not related to current production.3 Table 1 shows the proportionate share of each type of income over the period 1880-1957.