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t The aim of this paper is to present a framework which links functional
and personal income distribution. In the first part of the paper, Piketty’s book
‘‘Capital in the XXI Century’’ is briefly reviewed. Piketty’s framework is discussed
arguing that it can only partially explain levels and changes within personal income
distribution. Piketty links the returns from capital r to the rate of growth of national
income g in a very innovative way comparing them within a macroeconomic
framework. He claims that when returns on capital rise more quickly than the
overall economy and taxes on capital remain low, a vicious circle of ever-growing
dynastic wealth and growing concentration of wealth takes place. However, the rise
in the inequality of personal income distribution cannot only be explained by the
rise of capital incomes. An analysis of the generation of personal incomes, and
consequently of inequality, requires a suitable framework that links incomes at the
macroeconomic level (national accounts) and incomes at the level of the individual/household.
It is possible to set up this framework starting from individual
endowments and their link to the productive structure: that is to what can be called
the ‘‘generating function of personal income.’’ This function transforms personal
endowments into personal earnings, given the productive structure, the technologies,
and the market rules that determine the functional distribution. Personal
income distribution and its inequality are linked to the functional one through the
shares of capital and labor owned by each individual. The framework introduced
here seems to be a suitable tool to account for the fact that personal income distribution
is inextricably tied up to different sources of inequality in the distribution