By Robert von Weizsäcker
An knowing of the origins of gains distribution is of vital value for any public coverage which has the purpose of fighting fiscal inequality. This publication attempts to supply a few theoretical foundations which can function a rational foundation for such guidelines. The technique, strongly prompted via human capital conception, is mainly novel in that it allows person analyses at 3 interconnecting degrees of aggregation utilizing an analogous uncomplicated microeconomic version: the extent of the general gains distribution throughout all age teams; and the distribution of lifetime profits. The research demonstrates the interdependence among age composition, inequality, and public distribution coverage. It presents financial interpretations of empirical findings and identifies a number of coverage conflicts. It additionally addresses the query of the way modifications among people are reworked into source of revenue ameliorations.
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Extra info for A Theory of Earnings Distribution
E. 18 At the beginning of his working life the individual is endowed with an initial stock of human capital amounting to Ko (> 0). As the wage rate for the services made available from a human capital unit for one period amounts to R, the potential (maximum possible) earnings of the individual in the initial period are RK0 (cf. assumptions (2) and (5)). It is assumed that the level of the individual human capital stock is not fixed for all time; rather that the individual has the possibility of increasing his human capital stock in two ways: firstly, by the reinvestment of his human capital stock and, secondly, by purchasing market goods (particularly educational goods).
Companies are concerned only with the total human capital employed, independent of its distribution between individuals. This is also appropriate in terms of assumption (2). This does not mean that the aggregate demand curve for human capital is horizontal; it could very well be downward-sloping, for example because of decreasing marginal productivity within the company's production process. See, for example, Lichtenberg (1981). See also the criticisms expressed in Sattinger (1980, pp. 20-1). 12 See, for example, Rosen (1977, pp.
2). 5. The latter can also be expressed thus: R = 0, Vn > JV + 1. 30 A life-cycle model of individual earnings any, income; therefore he would be dropped from the current consideration. 19 If the fraction of the existing human capital stock, Ko, which is diverted for investment purposes in earnings period 0, is represented by s0, then the earnings actually realised in the period 0 amount to: If the direct 20 education costs are:PD 0 , where Do stands for the collection of goods and services purchased in period 0 and P designates the price per unit of D, then the disposable earnings of the individual in working period 0 are RK0(l — s 0 ) — PD0.