Theories of Income Distribution in Developed Countries

In this chapter a number of theories of income distribution will be discussed so as to provide the reader with a bird’s eye view of the state of the art. In order to keep this survey within manageable proportions some types of theories will be excluded, however. One type to be excluded is normative theories: theories on how income distribution ought to be according to some ethical principles. Another type to be excluded is purely stochastic theories. Every theory recognizes that incomes are subject to a large number of minor unidentified factors. But at least some factors can be identified. A purely stochastic theory can only be considered as an intermediary stage to be followed by the identification of important factors. We consider a lack of such identification a testimonium paupertatis: that is, a lack to draw attention to reality, where not all factors can be assumed to be of a random character. The third type to be excluded consists of theories insufficiently tested empirically. It is especially in the field of income distribution that a large number of theories are held by people who are influenced by some belief or ideology and who do not make even a modest attempt to verify their content with observed facts and figures.