Income distribution, economic systems and transition

We consider the differences in income distribution between market and planned economies in two ways. First, using benchmarks from the OECD area we review evidence from the countries of Central and Eastern Europe and the former Soviet Union during the socialist period. Second, we look at the transitions currently being made by the latter. In each case we review available data and the problems they present before considering in turn: (i) the distribution of earnings of full-time employees; (ii) the distribution of individuals' per capita household incomes; and (iii) the ways in which the picture is altered by nonwage benefits from work, price subsidies and social incomes in kind. For the socialist period we are able to consider long series of data, often covering several decades, and we can thus show the changes in the picture of distribution under the socialist system. We also emphasise the diversity across the countries concerned. For the period of transition, itself incomplete, the series are inevitably shorter but we are able to avoid basing conclusions on evidence drawn from single years. The picture during transition, like that under socialism, is varied. Russia has experienced very sharp increases in measured inequality to well above the top of the OECD range. The Czech Republic, Hungary and Poland have seen more modest rises. We note the lack of a satisfactory analytic framework in the literature that encompasses enough features of the transition, a framework which would help interpretation of the evidence.