Distribution of wealth is a comparison of the wealth of various members or groups in a society. It differs from the distribution of income in a manner analogous to the difference between position and speed.

Definition of wealth

Wealth is a person's net worth, expressed as:

wealth = assets - liabilities

The word "wealth" is often confused with "income". These two terms describe different but related things. Wealth consists of those items of economic value that an individual owns, while income is an inflow of items of economic value. Wealth needs to be differentiated from income because wealth is accumulated, while income is offset by expenses, which are an outflow of items of economic value. The relation between wealth, income, and expenses is:

change of wealth = income - expenses

A common mistake made by people embarking on a research project to determine the distribution of wealth is to use statistical data of income to describe the distribution of wealth. The distribution of income is substantially different from the distribution of wealth. According to the International Association for Research in Income and Wealth (I.A.R.I.W.), "It is found that the world distribution of wealth is much more unequal than that of income."

If an individual has a large income but also large expenses, their wealth could be small or even negative (debt). For example, Thomas Jefferson had a large income all his life, and yet died $100,000 in debt. His contempory, John Adams had a small but steady income but lived thriftily and died with $100,000 in assets.