Increasing Inequality in Transition Economies: Is There More to Come?

By P. Mitra, Ruslan G. Yemtsov. 2006

126 citations recorded by the source corpus.

This paper decomposes changes in inequality, which has in general been increasing in the transition economies of Eastern Europe and the former Soviet Union, both by income source and socio-economic group, with a view to understanding the determinants of inequality and assessing how it might evolve in the future. The empirical analysis relies on a set of inequality statistics that, unlike"official data", are consistent and comparable across countries and are based on primary records from household surveys recently put together for the World Bank study"Growth, Poverty and Inequality in Eastern Europe and the Former Soviet Union: 1998-2003"[World Bank (2005b)]. The increase in inequality in transition, as predicted by a number of theoretical models, in practice differed substantially across countries, with the size and speed of its evolution depending on the relative importance of its key determinants, viz., changes in the wage distribution, employment, entrepreneurial incomes and social safety nets. Its evolution was also influenced by policy. This diversity of outcomes is exemplified on the one hand for Central Europe by Poland, where the increase in inequality has been steady but gradual and reflects, inter alia, larger changes in employment and compensating adjustments in social safety nets and, on the other for the Commonwealth of Independent States by Russia, where an explosive overshooting of inequality peaked in the mid-1990s before being moderated through the extinguishing of wage arrears during its post-1998 recovery. The paper argues that the process of transition to a market economy is not complete and that further evolution of inequality will depend both on (i) transition-related factors, such as the evolution of the education premium, a bias in the investment climate against new private sector firms which are important vehicles of job creation and regional impediments to mobility of goods and labor, as well as increasingly (ii) other factors, such as technological change and globalization. The paper also contrasts key features of inequality in Russia in the context of other transition economies with trends in inequality observed in China where rapid economic growth has been accompanied by a steep increase in inequality. It argues that the latter's experience is, to a large extent, a developmental, rather than a transition-related phenomenonderiving from the rural-urban divide and is, therefore, of limited relevance for predicting changes in inequality in Russia.

Subfields: Economics and Econometrics, Sociology and Political Science

View Paper: https://www.semanticscholar.org/paper/39ce9e08c9326f932b6b1f90ac06a182bd40ce21

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

In Sociology and Political Science

Citations in the corpus

Measuring Income Inequality Across Countries and Over Time: The Standardized World Income Inequality Database (2019, background): “Other sources, such as many books, cannot be read into R. Finally, one source contains crucial information encoded in the typeface of its tables, information lost when the tables are read directly into R (see Mitra and Yemtsiv 2006, 6).”
Recent trends in inequality and poverty in developing countries (2013, background): “…also existed about pre-1990 earnings and household incomes in (former) Czechoslovakia, Hungary and Poland (Atkinson and Micklewright, 1992) 48 Milanovic and Ersado (2010); Ivaschenko (2002); Ferreira (1999); Milanovic (1998); Cornia (1996); Cornia and Reddy (2001); Mitra and Yemtsov (2006).”