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Inequality, Transfers and Growth

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  • Eswar Prasad
  • Michael P. Keane

Abstract

This paper challenges the conventional wisdom that inequality in Poland increased markedly during the economic transition. Income and consumption inequality actually declined in 1990-92 and rose only moderately above pre-transition levels by 1997. However, inequality in labor earnings increased markedly and consistently during 1990-97. Social transfer mechanisms, including pensions, helped mitigate increases in overall inequality and poverty. More importantly, these transfer mechanisms were well-designed to reduce political resistance to market-oriented reforms in the early years of transition, paving the way for rapid growth. Cross-country evidence from transition economies is consistent with this interpretation and with recent literature suggesting that inequality-reducing redistribution can enhance growth.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 00/117.

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Length: 52
Date of creation: 01 Jun 2000
Date of revision:
Handle: RePEc:imf:imfwpa:00/117

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Cited by:
  1. Irina Dolinskaya & Irina Tytell, 2002. "Transition and Regional Inequality in Russia," IMF Working Papers, International Monetary Fund 02/169, International Monetary Fund.
  2. Keane, Michael & Prasad, Eswar, 2001. "Social Transfers and Inequality During the Polish Transition," MPRA Paper 54326, University Library of Munich, Germany.
  3. Sergei Guriev & Barry W. Ickes, 2000. "Microeconomic Aspects of Economic Growth in Eastern Europe and the Former Soviet Union, 1950-2000," William Davidson Institute Working Papers Series, William Davidson Institute at the University of Michigan 348, William Davidson Institute at the University of Michigan.
  4. Keane, Michael & Prasad, Eswar, 2001. "A Political Economy Perspective on Redistribution and Growth in Transition," MPRA Paper 54289, University Library of Munich, Germany.
  5. Pauline Grosjean & Claudia Senik, 2008. "How populist democracy promotes market liberalization," PSE Working Papers halshs-00586284, HAL.

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