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INCOME – SNA

Statistics Directorate    
French Equivalent: Revenu – SCN

Definition:
Income, as it is generally understood in economics, is theoretically defined as the maximum amount that a household, or other unit, can consume without reducing its real net worth.

Disposable income in the System of National Accounts is equivalent to the economic theoretic concept only when the net worth at the beginning of the period is not changed by capital transfers, other changes in the volume of assets or real holding gains or losses.

Context:
Because of its use as an indicator of economic well-being, the concept of “income” also receives wide usage, not only with respect to individuals, but also household income. Although there is considerable debate on the definitional boundaries for income, for the micro-analyst, whose primary interest is the measurement of income distribution, income is primarily determined on the basis of what an individual perceives to be an income receipt of direct benefit to him or her.

Total income is the broadest measure of income and in this sense refers to regular receipts such as wages and salaries, income from self-employment, interest and dividends from invested funds, pensions or other benefits from social insurance and other current transfers receivable. Large and irregular receipts from inheritances, etc, are considered to be capital transfers because they are unlikely to be spent immediately on receipt and are ‘one-off’ in nature.

Because it is measured after the receipt of property and transfer receipts, but before any payments are made at the aggregate household level, total income includes a degree of double counting the extent of which varies between countries due to differing institutional arrangements. In countries where social insurance schemes are more extensive the higher total income will be relative to, say, income from employment.

In fact, the concept of total income of an individual as a measure of the economic well-being of individuals may be at best be regarded as a partial measure of well-being in the light of a high proportion of dual-earner, dual-income families that exist in many OECD Member countries. The precise relationship between employment-related income and total income to household income needs to be explored further.

Source Publication:
SNA [8.15].

Cross References:
Disposable income
Income – Eurostat

Hyperlink:
http://esa.un.org/unsd/sna1993/introduction.asp

Version Indicator: SNA

Statistical Theme: National accounts

Created on Tuesday, September 25, 2001

Last updated on Thursday, March 06, 2003