1 Introduction

1.1 The Purpose and Organization of the Book

Income and wealth, these are the fruits of our economic activities and, in turn, are the foundation of future economic activities. The aim of this book is to explain systematically how income and wealth are produced and distributed, a subject which is of fundamental importance in economic theory.

The distribution of income and wealth is determined in a market economy as a part of price formation. Given the varied abilities and preferences and also physical resources that people possess, we may conclude that income is merely a reflection of market equilibrium and may not require further discussion. Yet economists have long been interested in the study of income and wealth as an independent field, because they have wanted to answer the following basic questions that arise in our daily lives.

Why do workers who work equally hard obtain different incomes? Is this fair?

Why do people make different levels of effort? Is it a matter of preference? Is it possible that difference in job content influences the motivation of workers?

Through their experience of work, people expect to obtain many intangibles: they acquire new knowledge and new skills, find out who they are, establish confidence in themselves, and receive trust and respect by fulfilling social responsibilities. How does the market economy provide the jobs that meet the above expectations? Also, is it possible that the market does not provide the opportunity for these jobs equally among workers?

Does economic efficiency necessitate the uneven distribution among workers of the jobs that are desirable in the sense described above?

What is the relationship between economic efficiency or economic growth and income distribution?

If workers sometimes engage in co-operative and collective activities without competing with each other, what is their reason for doing so? Moreover, what consequence does such action have on the allocation of economic resources and income distribution?

Why do people save?

If those who have more income save more than those who have less income, does the difference in wealth not increase in a cumulative way and does not an extremely unequal society emerge?

-1-

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Income and Wealth
Table of contents

Table of contents

  • Acknowledgements ii
  • Income and Wealth iii
  • Contents v
  • List of Figures vii
  • List of Tables ix
  • 1: Introduction 1
  • Appendix 1.1 21
  • 2: The Concept of Distributive Justice 24
  • 3: The Labour Market and the Distribution of Income 53
  • Appendix 3.1 Mathematical Appendix 126
  • 4: Schooling and the Distribution of Earnings 140
  • Appendix 4.1 Mathematical Appendix 174
  • 5: The Labour Market and the Distribution of Income 176
  • 6: The Dual Labour Market Hypothesis and the Japanese Labour Market 241
  • 7: The Generation and Distribution of Wealth 283
  • 8: Conclusion 366
  • Bibliography 374
  • Index 391
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