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The political economy of development
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wealth and income, distribution of

the way in which the wealth and income of a nation are divided among its population, or the way in which the wealth and income of the world are divided among nations. Such patterns of distribution are discerned and studied by various statistical means, based on data of varying degrees of reliability.

Wealth is an accumulated store of possessions and financial claims. It may be given a monetary value if prices can be determined for each of the possessions; this process can be difficult when the possessions are such that they are not likely to be offered for sale. Income is a net total of the flow of payments received in a given time period. Some countries collect statistics on wealth from legally required evaluations of the estates of deceased persons, which may or may not be indicative of what is possessed by the living. In many countries, annual tax statements that measure income provide more or less reliable information. Differences in definitions of income--whether, for example, income should include payments that are transfers rather than the result of productive activity, or capital gains or losses that change the value of an individual's wealth--make comparisons difficult.

In order to classify patterns of national wealth and income, a basis of classification must be determined. Factor shares categorize wealth and income on the basis of the ownership of factors of production: labour, land, capital, and, occasionally, entrepreneurship, whose respective forms of income are labeled wages, rent, interest, and profit. Personal distribution statistics, usually developed from tax reports, categorize wealth and income on a per capita basis.

Gross national product (GNP) per capita provides a rough measure of annual national income per person in different countries. Countries that have a sizable modern industrial sector have a much higher GNP per capita than countries that are undeveloped. In the late 1980s, for example, the World Bank estimated that developed countries had a GNP per capita of $17,000, while undeveloped countries had less than $400. Income also varies greatly within countries. In the United States there is considerable variation between agricultural and industrial regions, females and males, and nonwhites and whites. While the bulk of the U.S. population has a middle income that is derived largely from earnings, wages can vary considerably among occupations.

A considerable proportion of high incomes derives from investment, and the higher the income, the higher the investment-derived portion tends to be. Because most fortunes require long periods to accumulate, the continuing existence of a class of very wealthy persons depends on their ability to keep their fortunes large and to pass them on to descendants. Earned incomes are affected by a different sort of inheritance. Access to well-paid jobs and to other occupations of high status is largely the product of education and opportunity. Typically, therefore, children tend to retain the status of their parents and are likely to earn similar incomes. Statistical studies of the distribution of wealth and income may shed light on various economic, social, and political questions.