Market income is of interest as the definitional sum of factor incomes; it is also closer to factor shares in national income. Disposable income equals the sum of factor incomes only coincidentally, if direct tax payments happen to be the same as cash benefit receipts, but it is of interest as the standard category of income in inequality research.
The first two categories correspond fairly closely to their counterparts in national income.(7) More difficulty arises for investment-related income, where three types of household income are related to `trading surplus, rent, and NPIA' (here, TSR) in national income: (i) direct receipts of rent, dividends, and interest (RDI), (ii) receipts of pension and other (private) benefits from occupational pension and life assurance funds (POB), and (iii) capital gains.
The first, RDI, is unproblematic, apart from the inclusion for consistency of imputed rents on owner-occupied housing in household income as well as national income. Private benefits, POB, pose more difficulty.
Second,to what extent are trends in factor shares in national income mirrored by those in household income?
Although fluctuations in self-employment income shares appear to have been similar in both household and national income, those in both employment and investment-related shares appear to have been markedly lower in household than in national income.
By 1994 no counterpart in household income had yet emerged to the rapid rise in the investment-related share in national income during the previous 2 years - although the omission of capital gains is partly responsible for the absence of such a counterpart in income, as measured here.(13) Moreover, during 1988-92, household investment-related income (RDI plus POB) rose continuously and strongly, even though its national income counterpart (TSR) fell heavily through 1991.
In the longer term, shares in household income might be influenced strongly by those in national income, even were the short-term relationships between the two weak or non-existent.
The national income share fell by nearly 8 per cent during 1979-94, but hardly changed at all during 1977-91.