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A POSITIVE AND A NORMATIVE THEORY OF INCOME DISTRIBUTION
Author(s) -
Tinbergen Jan
Publication year - 1970
Publication title -
review of income and wealth
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.024
H-Index - 57
eISSN - 1475-4991
pISSN - 0034-6586
DOI - 10.1111/j.1475-4991.1970.tb00699.x
Subject(s) - normative , economics , production theory , social welfare function , income distribution , production (economics) , microeconomics , compartmentalization (fire protection) , distribution (mathematics) , maximization , personal income , function (biology) , econometrics , welfare , mathematics , inequality , macroeconomics , market economy , mathematical analysis , philosophy , biochemistry , enzyme , chemistry , epistemology , evolutionary biology , biology
A positive theory of income distribution based on assumptions concerning the supply of and demand for each type of productive service is presented. The demand function of the organizers of production may be derived from the maximization of profits with the income scale and the production function as restrictions. A normative theory based on the maximization of a social utility or welfare function is also considered. In the normative theory, production functions and balance equations (some representing compartmentalization of factor markets) are introduced as restrictions and again an income scale results, this time maximizing social welfare. Empirical testing is also considered. The positive theory was developed in part to take into consideration the fact that personal income distributions can reasonably well be described by log normal distributions, and that skill parameters are often normally distributed. Limited testing of the influence of wealth, intelligence, education, and sex suggest that these account for only a small part of the variance in the income distribution. This suggests the need for further research.