Economic Inequality in Central, East and Southeast Europe

Abstract

Th e article analyses the issue of economic inequality in the transition economies of Central, East and Southeast Europe. It consists of a literature review and a descriptive analysis as well as an econometric modelling exercise. In the fi rst part we point at the fact that the rise in income inequality was triggered by the magnitude of transitional output loss and a reduction of formal employment. Rising wage inequality was at the core of total income dispersion, while government transfers had a redistributional function only in Central and Southeast European countries contrary to the Commonwealth of Independent States (CIS). In the econometric analysis it is found that for instance public utilities infrastructure liberalisation has increased inequality in transition, while price and trade liberalisation has decreased it. A high share of employment in industry and high government expenditures are connected with less inequality.

Earnings inequality and the informal economy

“…Rising wage disparities had the largest impact on the increase of total income inequality (Milanović, 1999; Mitra and Yemtsov, 2006). Factors usually cited as a major driving force of increased earnings inequality are increased returns to education, and sectoral and structural shifts in employment (towards services and less regulated forms of employment, such as temporary contracts), as well as changes in the institutional setting of wage bargaining (Leitner and Holzner, 2008). There is also empirical evidence of a significant and positive link between the level of income inequality and the share of the informal sector in the economy (Rosser et al.…”

Social welfare dynamics in post-socialist countries: unveiling the secrets of success

“…Economic freedom stimulates economic development within a country because it reveals opportunities for development of its economic capacity and may contribute to a reduction of social disparities. As some authors pointed out (Leitner and Holzner, 2008;Milanovic, 1999), an expanding private sector triggers growing income inequality during the first phases of post-socialist transformation. GDP dynamics is an economic growth indicator, but as far as equality is concerned, its influence is negligible, at least among CEE countries (Szeles, 2013).…”

Work Inequalities in the Crisis

“…The stability and 'rather low' level of income inequality over the entire transition period (between 0.28 and 0.30) was explained by the public sector's large presence in the economy and the state's role in transfer payments (Leitner and Holzner 2009). The most recent data, based on household incomes (HBS), show that, after an increase in 2008, both the Gini coeffi cient and the 80/20 ratio decreased, in line with the abovementioned wage data (Table 4.10).…”

“…A survey supported by TEPAV (Economic Policy Research Foundation of Turkey), UNICEF and the World Bank covering living conditions in fi ve large provincial centres (Adana, Ankara, İstanbul, İzmir and Kocaeli) showed that three-quarters of families reported a fall in their incomes in the period October 2008-June 2009(TEPAV 2009. According to the survey, the incomes of over 90 per cent of the poorest households have fallen.…”