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Some Explanations for Changes in the Distribution of Household Income in Slovakia: 1988 and 1996

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  • Thesia Garner

    ()

  • Katherine Terrell

    ()

Abstract

This paper measures the change in overall net monetary income inequality during the first seven years of transition and considers the relative importance of two possible explanations for the increase in inequality: a) changes in the sources of household income, and b) changes in the household composition. Changes in the sources of household income reflect the role of the government and market during the transition period, while changes in household composition reflect social reactions to the changing economic environment. We find that the increase in inequality in labor income drove the large increase in inequality (i.e., the Gini index of household per capita income rose from 0.195 in 1988 to 0.263 in 1996). Changes in the distribution of pensions and other social payments mitigated the rise in earnings inequality, with the latter playing a more role in reducing changes overall income inequality over time. We show there are large shifts in the demographic composition of households over this period: far fewer households with children, far more households headed by pensioners, increases in the number of one-person households and decreases in large (five person) households. Although we find that these shifts in the demographic composition of households are increasing overall inequality, by increasing between group inequality, most of the change in inequality over time is accounted for by increase in within group inequality. We conclude that over the first seven years of the transition labor market forces are driving changes in overall inequality in Slovakia to a much greater extent than changes in the Government's social safety net or in individual's decisions about household formation.

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Bibliographic Info

Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 377.

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Length: pages
Date of creation: 01 May 2001
Date of revision:
Handle: RePEc:wdi:papers:2001-377

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  1. Lerman, Robert I. & Yitzhaki, Shlomo, 1989. "Improving the accuracy of estimates of Gini coefficients," Journal of Econometrics, Elsevier, vol. 42(1), pages 43-47, September.
  2. Atkinson,Anthony Barnes & Micklewright,John, 1992. "Economic Transformation in Eastern Europe and the Distribution of Income," Cambridge Books, Cambridge University Press, number 9780521438827, October.
  3. Jenkins, S., 1988. "The Measurement Of Economic Inequality," Papers 170, Australian National University - Department of Economics.
  4. Mookherjee, Dilip & Shorrocks, Anthony F, 1982. "A Decomposition Analysis of the Trend in UK Income Inequality," Economic Journal, Royal Economic Society, vol. 92(368), pages 886-902, December.
  5. Thesia I. Garner & Katherine Terrell, 1998. "A Gini decomposition analysis of inequality in the Czech and Slovak Republics during the transition," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 6(1), pages 23-46, 05.
  6. Lerman, Robert I & Yitzhaki, Shlomo, 1985. "Income Inequality Effects by Income," The Review of Economics and Statistics, MIT Press, vol. 67(1), pages 151-56, February.
  7. Shorrocks, A F, 1980. "The Class of Additively Decomposable Inequality Measures," Econometrica, Econometric Society, vol. 48(3), pages 613-25, April.
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