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. Fo ...

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 rel ...

, 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 isla ...

is called

rent Rent may refer to: Economics *Renting, an agreement where a payment is made for the temporary use of a good, service or property *Economic rent, any payment in excess of the cost of production *Rent-seeking, attempting to increase one's share of e ...

, 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 la ...

is called

wage A wage is payment made by an employer to an employee for work done in a specific period of time. Some examples of wage payments include compensatory payments such as ''minimum wage'', '' prevailing wage'', and ''yearly bonuses,'' and remune ...

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 nat ...

, while factor income and current transfers together are referred to as

private income Private income is either: * any type of income received by a private individual or household, often derived from occupational activities, or * income of an individual that is not in the form of a salary, wage, or commission (e.g. income from inves ...

. 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, an ...

situations and to find out the difference between

Gross Domestic Product Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced and sold (not resold) in a specific time period by countries. Due to its complex and subjective nature this measure is of ...

and

Gross Domestic Income The Gross Domestic Income (GDI) is the total income received by all sectors of an economy within a state. It includes the sum of all wages, profits, and taxes, minus subsidies. Since all income is derived from production (including the production o ...

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 agreem ...

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