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Economic transition and the distributions of income and wealth

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  • Francisco H. G. Ferreira

Abstract

This paper relies on a model of wealth distribution dynamics and occupational choice to investigate the distributional consequences of policies and developments associated with transition from central planning to a market system. The model suggests that even an efficient privatization designed to be egalitarian may lead to increases in inequality (and possibly poverty), both during transition and in the new steady‐state. Creation of new markets in services also supplied by the public sector may also contribute to an increase in inequality, as can labour market reforms that lead to a decompression of the earnings structure and to greater flexibility in employment. The results underline the importance of retaining government provision of basic public goods and services; of removing barriers that prevent the participation of the poor in the new private sector; and of ensuring that suitable safety nets are in place.

Suggested Citation

  • 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.
  • Handle: RePEc:bla:etrans:v:7:y:1999:i:2:p:377-410
    DOI: 10.1111/1468-0351.00018
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    1. Oded Galor & Joseph Zeira, 1993. "Income Distribution and Macroeconomics," Review of Economic Studies, Oxford University Press, vol. 60(1), pages 35-52.
    2. Francisco H.G. Ferreira & Julie Litchfield, 1998. "Education or Inflation? The Roles of Structural Factors and Macroeconomic Instability in Explaining Brazilian Inequality in the 1980s," STICERD - Distributional Analysis Research Programme Papers 41, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    3. Roland Benabou, 1996. "Unequal Societies," NBER Working Papers 5583, National Bureau of Economic Research, Inc.
    4. Atkinson,Anthony Barnes & Micklewright,John, 1992. "Economic Transformation in Eastern Europe and the Distribution of Income," Cambridge Books, Cambridge University Press, number 9780521438827.
    5. 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.
    6. Thesia I. Garner & Katherine Terrell, 1997. "Changes in Distribution and Welfare in Transition Economies: Market vs. Policy in the Czech Republic and Slovakia," William Davidson Institute Working Papers Series 77, William Davidson Institute at the University of Michigan.
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