Abstract

Many different variables can be used to evaluate the distribution of living standards in a society. These focal variables include monetary indicators, such as expenditure, income, and wealth, as well as non-monetary indicators like multidimensional measures of material standard of living, happiness and life satisfaction, functionings, and capabilities. This article takes income as the focal variable. Section 2 outlines the conceptual difference between consumption, current income, and permanent income, and then moves on to examine the nuances of the definition of income and the further methodological decisions that need to be taken to study income inequality. Section 3 deals with the empirics of income distribution in richer countries, covering both the evidence at the turn of the century and the evolution over the last thirty years of the inequality of market and disposable incomes, and the role of cash and non-cash redistribution. Section 4 concludes with suggestions for future research.