Income Distribution and Education

Abstract

This chapter explains the process of income distribution and education. There are two dimensions to the distribution of income, the functional distribution and the personal distribution. The functional distribution of income is concerned with the distribution of the output of an economy among the factors of production. The personal distribution of income, on the other hand, is concerned with the sources and magnitudes of income received by individuals, families, or households. When the economy is simple and household survey data on income are scarce, analyses of the functional distribution of income are used to generate insights regarding the personal distribution of income. Education affects, and is affected by, the productivity of individuals and hence the distribution of income. Traditionally, capital is the factor of production that results from the accumulation of investment whereas labor is the factor that depends primarily on the size of the labor force. Mobility of labor from one human factor of production to another is limited by the length, difficulty, and accessibility of the educational process required for a worker with one set of skills to acquire another set.