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Between Communism and Capitalism: Long-Term Inequality in Poland, 1892-2015

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  • Pawel Bukowski
  • Filip Novokmet

Abstract

How has Polish inequality evolved between communism and capitalism to reach one of the highest levels in Europe today? To address this question, we construct the first series on the long-term distribution of income in Poland by combining tax, household survey and national accounts data. We document a U-shaped evolution of inequalities from the end of the 19th century until today: (i) inequality was high before WWII; (ii) abruptly fell after the introduction of communism in 1947 and stagnated at low levels during the whole communist period; (iii) experienced a sharp rise with the return to capitalism in 1989. Between 1989 and 2015 the top 10% income share increased from 23% to 35% and the top 1% income share from 4% to 13%. Frequently quoted Poland's transition success has largely benefited top income groups. We find that inequality was high in the first half of the 20th century due to strong concentration of capital income at the top of the distribution. The secular fall after WW2 was largely to a combination of capital income shocks from war destructions with communist policies both eliminating private ownership and forcing wage compression. The rise of inequality after the return to capitalism in the early 1990s was induced both by the rise of top labour and capital incomes. We attribute this to labour market liberalisation and privatisation. However, the strong rise in inequality in the 2000s was driven solely by the increase in top capital incomes, which is likely related to current globalization forces. Yet overall, the unique Polish inequality history speaks about the central role of policies and institutions in shaping inequality in the long run.

Suggested Citation

  • Pawel Bukowski & Filip Novokmet, 2019. "Between Communism and Capitalism: Long-Term Inequality in Poland, 1892-2015," CEP Discussion Papers dp1628, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp1628
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    Keywords

    income inequality; transformation; Poland;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • N34 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - Europe: 1913-

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