Definition: Distribution and use of income accounts

ESA 1995

Distribution and use of income are analysed in four stages: primary distribution, secondary distribution, redistribution in kind and use of income.

The first stage concerns the generation of income resulting directly from the production process and its distribution between the production factors (labour, capital) and general government (via taxes on production and imports, and subsidies). It enables the operating surplus (or mixed income in the case of households) and primary income to be determined. 

The second stage traces redistribution of income via transfers other than social transfers in kind. This yields the disposable income. 

The third stage describes redistribution via social transfers in kind, yielding the adjusted disposable income. 

The fourth stage describes how the income is consumed and saved, yielding the saving.
Eurostat, "European System of Accounts - ESA 1995", Office for Official Publications of the European Communities, Luxembourg, 1996

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