IDEAS home Printed from https://ideas.repec.org/a/bla/etrans/v7y1999i2p299-341.html
   My bibliography  Save this article

Explaining the increase in inequality during transition

Author

Listed:
  • Branko Milanovic

Abstract

This paper attempts to explain the increase in inequality that has been observed in all transition economies by constructing a simple model of change in composition of employment during the transition. The change consists of the ‘hollowing‐out’ of the state‐sector middle class as it moves into either the ‘rich’ private sector or the ‘poor’ unemployed sector. The predictions of the model are contrasted with the empirical evidence from annual household income surveys from six transition economies (Bulgaria, Hungary, Latvia, Poland, Russia and Slovenia) over the period 1987‐95. We find that the most important factor driving overall inequality upwards was increased inequality of wage distribution. The non‐wage private sector contributed strongly to inequality only in Latvia and Russia. Pensions, paradoxically, also pushed inequality up in Central Europe, while non‐pension social transfers were too small everywhere and too poorly focussed to make much difference.

Suggested Citation

  • Branko Milanovic, 1999. "Explaining the increase in inequality during transition," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 7(2), pages 299-341, July.
  • Handle: RePEc:bla:etrans:v:7:y:1999:i:2:p:299-341
    DOI: 10.1111/1468-0351.00016
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/1468-0351.00016
    Download Restriction: no

    File URL: https://libkey.io/10.1111/1468-0351.00016?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Giovanni Andrea Cornia, 1994. "Income distribution, poverty and welfare in transitional economies: A comparison between Eastern Europe and China," Journal of International Development, John Wiley & Sons, Ltd., vol. 6(5), pages 569-607, September.
    2. Orazem, Peter F & Vodopivec, Milan, 1995. "Winners and Losers in Transition: Returns to Education, Experience, and Gender in Slovenia," World Bank Economic Review, World Bank Group, vol. 9(2), pages 201-230, May.
    3. Simon Commander & Andrei Tolstopiatenko & Ruslan Yemtsov, 1999. "Channels of redistribution: Inequality and poverty in the Russian transition," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 7(2), pages 411-447, July.
    4. Jan Rutkowski, 1996. "High skills pay off: the changing wage structure during economic transition in Poland," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 4(1), pages 89-112, May.
    5. Atkinson,Anthony Barnes & Micklewright,John, 1992. "Economic Transformation in Eastern Europe and the Distribution of Income," Cambridge Books, Cambridge University Press, number 9780521438827, October.
    6. Sheila Marnie & Hohn Micklewright, 1994. "Poverty In Pre‐Reform Uzbekistan: What Do Official Data Really Reveal?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 40(4), pages 395-414, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Flemming, J.S. & Micklewright, John, 2000. "Income distribution, economic systems and transition," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 14, pages 843-918, Elsevier.
    2. Nancy Vandycke, 2001. "Access to Education for the Poor in Europe and Central Asia : Preliminary Evidence and Policy Implications," World Bank Publications, The World Bank, number 13974, July.
    3. Rutkowski, Jan, 2006. "Labor market developments during economic transition," Policy Research Working Paper Series 3894, The World Bank.
    4. Keane, Michael P. & Prasad, Eswar S., 2006. "Changes in the structure of earnings during the Polish transition," Journal of Development Economics, Elsevier, vol. 80(2), pages 389-427, August.
    5. Ganguli, Ina & Terrell, Katherine, 2006. "Institutions, markets and men's and women's wage inequality: Evidence from Ukraine," Journal of Comparative Economics, Elsevier, vol. 34(2), pages 200-227, June.
    6. Puhani, Patrick A., 1997. "All Quiet on the Wage Front? Gender, Public-Private Sector Issues, and Rigidities in the Polish Wage Structure," ZEW Discussion Papers 97-03, ZEW - Leibniz Centre for European Economic Research.
    7. Pastore, Francesco & Verashchagina, Alina, 2006. "Private returns to human capital over transition: A case study of Belarus," Economics of Education Review, Elsevier, vol. 25(1), pages 91-107, February.
    8. Francisco H. G. Ferreira, 1999. "Economic transition and the distributions of income and wealth," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 7(2), pages 377-410, July.
    9. Noorkoiv, Rivo & Orazem, Peter F. & Puur, Allan & Vodopivec, Milan, 1997. "How Estonia's economic transition affected employment and wages (1989-95)," Policy Research Working Paper Series 1837, The World Bank.
    10. McGuinness, Seamus & Kelly, Elish & Pham, Thi Thu Phuong & Ha, Thi Thu Thuy & Whelan, Adele, 2021. "Returns to education in Vietnam: A changing landscape," World Development, Elsevier, vol. 138(C).
    11. Bukowski, Pawel & Novokmet, Filip, 2019. "Between communism and capitalism: long-term inequality in Poland, 1892-2015," LSE Research Online Documents on Economics 102834, London School of Economics and Political Science, LSE Library.
    12. Kenneth Smith, 2007. "Determinants of Soviet Household Income," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 4(1), pages 3-24, June.
    13. Pawel Bukowski & Filip Novokmet, 2019. "Between Communism and Capitalism: Long-Term Inequality in Poland, 1892- 2015," World Inequality Lab Working Papers hal-02876995, HAL.
    14. Andrén, Daniela & Andrén, Thomas, 2007. "Occupational Gender Composition and Wages in Romania: From Planned Equality to Market Inequality?," IZA Discussion Papers 3152, Institute of Labor Economics (IZA).
    15. Peter Galasi, 1998. "Income Inequality and Mobility in Hungary 1992-96," Papers iopeps98/3, Innocenti Occasional Papers, Economic Policy Series.
    16. Jan J. Rutkowski & Stefano Scarpetta, 2005. "Enhancing Job Opportunities : Eastern Europe and the Former Soviet Union," World Bank Publications, The World Bank, number 7408, July.
    17. World Bank, 2003. "The Russian Labor Market : Moving from Crisis to Recovery," World Bank Publications, The World Bank, number 15007, July.
    18. Randall K. Filer & Jan Hanousek, 2002. "Data Watch: Research Data from Transition Economies," Journal of Economic Perspectives, American Economic Association, vol. 16(1), pages 225-240, Winter.
    19. Paweł Bukowski & Filip Novokmet, 2021. "Between communism and capitalism: long-term inequality in Poland, 1892–2015," Journal of Economic Growth, Springer, vol. 26(2), pages 187-239, June.
    20. Thesia I. Garner & Katherine Terrell, 1998. "A Gini decomposition analysis of inequality in the Czech and Slovak Republics during the transition1," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 6(1), pages 23-46, May.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:etrans:v:7:y:1999:i:2:p:299-341. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/ebrdduk.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/ebrdduk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.