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Growth, income distribution and well-being in transition countries

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  • Carola Grün
  • Stephan Klasen

Abstract

In this paper we use several well-being measures that combine average income with a measure of inequality to undertake international and intertemporal well-being comparisons in transition countries. Our well-being measures drastically change the impression of levels and changes in well-being from a traditional reliance on income measures. They also significantly affect the ranking of countries, when compared to rankings based on real incomes. Due to low inequality and moderate income levels, socialist countries enjoyed relatively high levels of economic well-being. In the transition process, rising inequality and falling incomes have led to a dramatic decline in well-being in many transition countries, and a corresponding worsening in rank when compared to other countries. There is great variance in the income and inequality performance of transition countries. We find a close correlation between income losses and inequality increases suggesting the ability of appropriate policies to reduce the income losses and reduce rising inequality. While the political dimension of transformation remains largely successful, our indicators suggest that most transition countries have yet to reach the level of economic well-being enjoyed in the late 1980s.

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Bibliographic Info

Article provided by The European Bank for Reconstruction and Development in its journal Economics of Transition.

Volume (Year): 9 (2001)
Issue (Month): 2 (July)
Pages: 359-394

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Handle: RePEc:bla:etrans:v:9:y:2001:i:2:p:359-394

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References

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  1. Klaus Deininger & Lyn Squire, 1996. "A New Data Set Measuring Income Inequality," CEMA Working Papers 512, China Economics and Management Academy, Central University of Finance and Economics.
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  4. Persson, T. & Tabellini, G., 1993. "Is Inequality Harmful for Growth," Papers 537, Stockholm - International Economic Studies.
  5. Kristin J. Forbes, 2000. "A Reassessment of the Relationship between Inequality and Growth," American Economic Review, American Economic Association, vol. 90(4), pages 869-887, September.
  6. Bardhan, Kalpana & Klasen, Stephan, 1999. "UNDP's Gender-Related Indices: A Critical Review," World Development, Elsevier, vol. 27(6), pages 985-1010, June.
  7. Dagum, Camilo, 1990. "On the relationship between income inequality measures and social welfare functions," Journal of Econometrics, Elsevier, vol. 43(1-2), pages 91-102.
  8. Clarke, George R. G., 1995. "More evidence on income distribution and growth," Journal of Development Economics, Elsevier, vol. 47(2), pages 403-427, August.
  9. Mattias Lundberg & Lyn Squire, 2003. "The simultaneous evolution of growth and inequality," Economic Journal, Royal Economic Society, vol. 113(487), pages 326-344, 04.
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  11. Dollar, David & Kraay, Aart, 2001. "Growth is good for the poor," Policy Research Working Paper Series 2587, The World Bank.
  12. UNICEF Innocenti Research Centre. MONEE project, 1993. "Public Policy and Social Conditions," Regional Monitoring Report remore93/8, UNICEF Innocenti Research Centre.
  13. Easterlin, Richard A., 1995. "Will raising the incomes of all increase the happiness of all?," Journal of Economic Behavior & Organization, Elsevier, vol. 27(1), pages 35-47, June.
  14. Osberg, L. & Sharpe, A., 1998. "An Index of Economic Well-being for Canada," Department of Economics at Dalhousie University working papers archive 98-08, Dalhousie, Department of Economics.
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Citations

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Cited by:
  1. Molnár, György & Kapitány, Zsuzsa, 2006. "Mobilitás, bizonytalanság és szubjektív jóllét Magyarországon
    [Mobility, uncertainty and subjective welfare in Hungary]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(10), pages 845-872.
  2. Gul, Adnan, 2008. "Is external debt an effective way of bringing economic reforms?," MPRA Paper 10979, University Library of Munich, Germany.
  3. David Aristei & Cristiano Perugini, 2011. "Speed and Sequencing of Transition Reforms and Income Inequality: a Panel Data Analysis," Working Papers 302, Institut für Ost- und Südosteuropaforschung (Institute for East and South-East European Studies).
  4. Fardmanesh, Mohsen & Tan, Li, 2003. "Wage and price control policies in transition economies," Journal of Development Economics, Elsevier, vol. 70(1), pages 173-200, February.
  5. Jens Holscher & Cristiano Perugini & Fabrizio Pompei, 2011. "Wage inequality, labour market flexibility and duality in Eastern and Western Europe," Post-Communist Economies, Taylor & Francis Journals, vol. 23(3), pages 271-310.
  6. Hazans, Mihails, 2002. "Social returns to commuting in the Baltic states," ERSA conference papers ersa02p232, European Regional Science Association.
  7. Carola Grün & Stephan Klasen, 2003. "Growth, Income Distribution, and Well-Being: Comparisons across Space and Time," CESifo Working Paper Series 837, CESifo Group Munich.
  8. Christoph Bühler, 2003. "Additional work, family agriculture, and the birth of a first or a second child in Russia at the beginning of the 1990s," MPIDR Working Papers WP-2003-012, Max Planck Institute for Demographic Research, Rostock, Germany.
  9. BARTOLINI Stefano & MIKUCKA Malgorzata & SARRACINO Francesco, 2012. "Money, Trust and Happiness in Transition Countries: Evidence from Time Series," CEPS/INSTEAD Working Paper Series 2012-04, CEPS/INSTEAD.
  10. Keane, Michael & Prasad, Eswar, 2001. "Social Transfers and Inequality During the Polish Transition," MPRA Paper 54326, University Library of Munich, Germany.
  11. Rolf Maier, 2005. "External Debt and Pro-Poor Growth," Macroeconomics 0504031, EconWPA.
  12. Simona Šarotar Žižek & Matjaž Mulej & Sonja Treven, 2010. "Requisite Holism Of Individuals As A Precondition For The Humankind’S Way Out From The 2008- Crisis," Analele Stiintifice ale Universitatii "Alexandru Ioan Cuza" din Iasi - Stiinte Economice, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 57, pages 399-419, november.
  13. Hazans, Mihails, 2003. "Commuting in the Baltic States: Patterns, determinants and gains," ZEI Working Papers B 02-2003, ZEI - Center for European Integration Studies, University of Bonn.
  14. Maier, Rolf, 2005. "External Debt and Pro-Poor Growth," Proceedings of the German Development Economics Conference, Kiel 2005 23, Verein für Socialpolitik, Research Committee Development Economics.
  15. Gruen, Carola & Klasen, Stephan, 2012. "Has transition improved well-being?," Economic Systems, Elsevier, vol. 36(1), pages 11-30.
  16. Rolf Maier, 2005. "Exchange Rate Regimes and Pro-Poor Growth," International Finance 0504008, EconWPA.
  17. Aristei, David & Perugini, Cristiano, 2012. "Inequality and reforms in transition countries," Economic Systems, Elsevier, vol. 36(1), pages 2-10.

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