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Growth and Inequality: Evidence from Transitional Economies

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  • Oleksiy Ivaschenko
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    Abstract

    The transitional economies of Eastern Europe (EE) and the former Soviet Union (FSU) experienced a dramatic increase in income inequality in the 1990s. In this paper I investigate the causes of unprecedented changes in income distribution using a unique panel of inequality estimates for 24 transitional countries for the period 1989-1998. The fixed effects model is used to control for unobservable country-specific effects that result in a missing-variable bias in cross-sectional studies. The relationship between income inequality, measured by Gini coefficient, and per capita GDP is shown to be positive for EE, but negative for the FSU. Economic liberalization, privatization and deindustrialization are found to have contributed to the rise in income inequality in the transitional region. Hyperinflation also makes the distribution of income more unequal. I do not find strong support for unemployment and the size of government consumption affecting income distribution. While civil conflicts increase income inequality, the extent of political rights and civil liberties is not found to directly affect income distribution.

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    File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2002/wp-cesifo-2002-06/746.pdf
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    Bibliographic Info

    Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 746.

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    Date of creation: 2002
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    Handle: RePEc:ces:ceswps:_746

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    Keywords: economic growth; income distribution; transitional economies; panel data;

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    1. Thurow, Lester C, 1970. "Analyzing the American Income Distribution," American Economic Review, American Economic Association, American Economic Association, vol. 60(2), pages 261-69, May.
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    Cited by:
    1. Abdur R Chowdhury, 2004. "Private Savings in Transition Economies: Are there Terms of Trade Shocks?," Comparative Economic Studies, Palgrave Macmillan, vol. 46(4), pages 487-514, December.
    2. Chowdhury, Abdur R., 2003. "Do asymmetric terms of trade shocks affect private savings in a transition economy?," BOFIT Discussion Papers, Bank of Finland, Institute for Economies in Transition 3/2003, Bank of Finland, Institute for Economies in Transition.
    3. Aristei, David & Perugini, Cristiano, 2012. "Inequality and reforms in transition countries," Economic Systems, Elsevier, Elsevier, vol. 36(1), pages 2-10.
    4. Milanovic, Branko, 2003. "Is inequality in Africa really different ?," Policy Research Working Paper Series 3169, The World Bank.
    5. Abdur R. Chowdhury, 2003. "Do asymmetric terms of trade shocks affect private savings in a transition economy?," Macroeconomics, EconWPA 0303006, EconWPA.
    6. Jeffrey B. Miller & Stoyan Tenev, 2005. "State and Ownership Reforms in Transition Economics: China vs. the Orthodoxy," Working Papers, University of Delaware, Department of Economics 05-10, University of Delaware, Department of Economics.
    7. Facundo Alvaredo & Leonardo Gasparini, 2013. "Recent Trends in Inequality and Poverty in Developing Countries," CEDLAS, Working Papers, CEDLAS, Universidad Nacional de La Plata 0151, CEDLAS, Universidad Nacional de La Plata.

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