The SAM as a framework to catch the generation process of inequality in the household income distribution

Marisa Civardi () and Renata Targetti Lenti ()
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Marisa Civardi: Università di Milano Bicocca
Renata Targetti Lenti: Università di Pavia

Working papers from Società Italiana di Economia Pubblica

Abstract: Aim of this paper is to present the SAM as a framework which allows linking functional and personal income distribution. In the first part of the paper Piketty’s book “Capital in the XXI Century” is briefly reviewed. Piketty’s framework is discussed arguing that it can only partially explain levels and changes within personal income distribution. Piketty links the returns from capital r to the rate of growth of national income g in a very innovative way comparing them within a macroeconomic framework. He claims that when returns on capital rise more quickly than the overall economy and taxes on capital remain low, a vicious circle of ever-growing dynastic wealth and growing concentration of wealth takes place. However, the rise in the inequality of personal income distribution cannot only be explained by the rise of capital incomes. It is possible to set up this framework starting from individual endowments and their link to the productive structure : that is to what can be called the “generating function of personal income”. This function transforms personal endowments into personal earnings, given the productive structure, the technologies, and the market rules that determine the functional distribution. Personal income distribution and its inequality are linked to the functional one through the shares of capital and labor owned by each individual. The framework introduced here seems to be a suitable tool to account for the fact that personal income distribution is inextricably tied up to different sources of inequality in the distribution of national income. Sources come from institutional and productive structures (matrix Y), but also from the distribution of endowments and of individual/ household entitlements (matrix S). This approach, we argue, allows for the assessment and evaluation of the effects of “ambitious new policies”, aimed at reducing poverty and inequality e x-ante, as suggested by Atkinson in his last book.

Keywords: SAM; Personal income distribution; Factor income distribution (search for similar items in EconPapers)
JEL-codes: D31 D33 E16 (search for similar items in EconPapers)
Date: 2019-02
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