Factor Income is the flow of

income Income is the consumption and saving opportunity gained by an entity within a specified timeframe, which is generally expressed in monetary terms. Income is difficult to define conceptually and the definition may be different across fields. For ...

that is derived from the

factors of production In economics, factors of production, resources, or inputs are what is used in the production process to produce output—that is, goods and services. The utilized amounts of the various inputs determine the quantity of output according to the relat ...

, i.e., the general inputs required to produce goods and services. Factor Income on the use of

land Land, also known as dry land, ground, or earth, is the solid terrestrial surface of the planet Earth that is not submerged by the ocean or other bodies of water. It makes up 29% of Earth's surface and includes the continents and various islan ...

is called rent, income generated from

labor Labour or labor may refer to: * Childbirth, the delivery of a baby * Labour (human activity), or work ** Manual labour, physical work ** Wage labour, a socioeconomic relationship between a worker and an employer ** Organized labour and the labour ...

is called

wage A wage is payment made by an employer to an Worker, employee for work (human activity), work done in a specific period of time. Some examples of wage payments include wiktionary:compensatory, compensatory payments such as ''minimum wage'', ''p ...

s, and income generated from

capital Capital may refer to: Common uses * Capital city, a municipality of primary status ** List of national capital cities * Capital letter, an upper-case letter Economics and social sciences * Capital (economics), the durable produced goods used fo ...

is called profit. The factor income of all normal residents of a country is referred to as the

national income A variety of measures of national income and output are used in economics to estimate total economic activity in a country or region, including gross domestic product (GDP), gross national product (GNP), net national income (NNI), and adjusted nati ...

, while factor income and current transfers together are referred to as private income. Factor income is used to analyze

macroeconomic Macroeconomics (from the Greek prefix ''makro-'' meaning "large" + ''economics'') is a branch of economics dealing with performance, structure, behavior, and decision-making of an economy as a whole. For example, using interest rates, taxes, and ...

situations and to find out the difference between Gross Domestic Product and Gross Domestic Income which is also the difference between the total value of the goods and services produced in a country and the net income of the citizens of the country. This helps the government understand the magnitude of income of the country's citizens and the citizens living abroad. The applicability of the concept of Factor Income can be seen in

developing countries A developing country is a sovereign state with a lesser developed industrial base and a lower Human Development Index (HDI) relative to other countries. However, this definition is not universally agreed upon. There is also no clear agree ...

where large portion of their Income is through foreign direct investment which creates a massive gap between gross domestic product (GDP) and gross national income (GNI).

References

{{Authority control Factor income distribution