The Role of Government in Functional Distribution of Income and Size Distribution of Income

Functional distribution of income, also known as distribution of factor income, studies income distribution from the perspective of income source, which is the initial distribution of national income. Size distribution of income, also known as distribution of household income, focuses on the relationship between proportion of population at different strata and proportion of their income, which is regarded as the ultimate distribution of national income. Generally
speaking, the bigger the gap in the functional distribution of income is, the more disparity will be found in the size distribution of income. The third approach to studying national income distribution is to divide end uses, i.e. dividing national output into two end uses including investment and consumption. As the largest economic body in the modern economy, government can affect the functional distribution of income and size distribution of income by adjusting the end use of national output.