Distributional Role of the State

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The market economy provides opportunities for individuals to earn an income and also acquire wealth. But the opportunities of earning and income are not equally distributed. Individuals are not provided with equal opportunities in education. Some are also limited in their capacity to learn or they may have acquired a skill only to find that the skill is declining.

Introduction

(SJ Grant 2000).
It is a general characteristic of developing countries that income is unevenly distributed. Partly, because the income generating assets especially land are owned by the few. As a result we can see great extremes of both the rich and the poor. In 1998 for example the World Bank figures show that in Peru the poorest 20% of the population had only 4.4percent of total household income, while the richest 20% had 51.3% of total household income. These great extremes of the rich and the poor mean that in developing countries deprivation is very common.
The distribution of income can be examined in two main ways .One is by examining the distribution of income between the factors of production. In this case the wages account for the largest percentage but the share of income has fallen over the years. Another way of examining the distribution of income is to examine how disposable income is distributed. Disposable income mainly consists of incomes that are derived from factor services together with various forms of cash benefits, i.e. social security payments etc . Minus direct taxes i.e. ...
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