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On The Possibility Of Measuring The Distribution Of Personal Income

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  • Jørgen S. Dich

Abstract

The income distribution statistics which are based on income for a single year show a far larger inequality of income than actually exists. The distribution of annual incomes differs from the distribution of lifetime income partly because of short run fluctuations because of such things as sickness, unemployment, and unusual gains, and partly because different individuals are at different points in their life cycles. The vertical distribution of income can be considered to be the distribution of lifetime income. The horizontal distribution can be considered to be the differences arising in the current period due to short run fluctuations and differences in the age‐income cycle of persons. The observed annual income distribution statistics are a mixture of the vertical and horizontal distributions. The estimation of the lifetime income distribution implies discounting, and also raises questions as to the treatment of transfers, subsidies, public investments and taxes. However, statistics based upon a mixture of the horizontal and vertical distributions of income are of no interest.

Suggested Citation

  • Jørgen S. Dich, 1970. "On The Possibility Of Measuring The Distribution Of Personal Income," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 16(3), pages 265-272, March.
    • Handle: RePEc:bla:revinw:v:16:y:1970:i:3:p:265-272
    DOI: 10.1111/j.1475-4991.1970.tb00702.x
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