ABSTRACT
According to Ricardo, theory of income distribution is to determine wages in the labor market, rent in the land market, rate of interest in the capital market, factors in production, economic structure and wealth accumulation. Okun observed a trade-off between equality and efficiency in 1975:1 ‘The contrasts among American families in living standards and in material wealth reflect a system of rewards and penalties that is intended to encourage effort and channel it into socially productive activity. To the extent that the system succeeds, it generates an efficient economy. But that pursuit of efficiency necessarily creates inequalities. And hence society faces a tradeoff between equality and efficiency. ... It is, in my view, our biggest socioeconomic tradeoff, and it plagues us in dozen of dimensions of social policy.’ Nevertheless, Atkinson and Bourguignon pointed out in 2000:2 3‘the literature [on theory of income distribution] thus offers a series of building blocks with which distribution issues are to be studied. Because of the natural complexity of the subject, however, no serious attempt at integrating them has really been made.’
