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Growth and Inequality: Evidence from Transitional Economies


  • Oleksiy Ivaschenko


The transitional economies of Eastern Europe (EE) and the former Soviet Union (FSU) experienced a dramatic increase in income inequality in the 1990s. In this paper I investigate the causes of unprecedented changes in income distribution using a unique panel of inequality estimates for 24 transitional countries for the period 1989-1998. The fixed effects model is used to control for unobservable country-specific effects that result in a missing-variable bias in cross-sectional studies. The relationship between income inequality, measured by Gini coefficient, and per capita GDP is shown to be positive for EE, but negative for the FSU. Economic liberalization, privatization and deindustrialization are found to have contributed to the rise in income inequality in the transitional region. Hyperinflation also makes the distribution of income more unequal. I do not find strong support for unemployment and the size of government consumption affecting income distribution. While civil conflicts increase income inequality, the extent of political rights and civil liberties is not found to directly affect income distribution.

Suggested Citation

  • Oleksiy Ivaschenko, 2002. "Growth and Inequality: Evidence from Transitional Economies," CESifo Working Paper Series 746, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_746

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    References listed on IDEAS

    1. Thurow, Lester C, 1970. "Analyzing the American Income Distribution," American Economic Review, American Economic Association, vol. 60(2), pages 261-269, May.
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    Cited by:

    1. Abdur R. Chowdhury, 2003. "Do asymmetric terms of trade shocks affect private savings in a transition economy?," Macroeconomics 0303006, EconWPA.
    2. Abdur R Chowdhury, 2004. "Private Savings in Transition Economies: Are there Terms of Trade Shocks?," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 46(4), pages 487-514, December.
    3. Milanovic, Branko, 2003. "Is inequality in Africa really different ?," Policy Research Working Paper Series 3169, The World Bank.
    4. Chowdhury, Abdur R., 2003. "Do asymmetric terms of trade shocks affect private savings in a transition economy?," BOFIT Discussion Papers 3/2003, Bank of Finland, Institute for Economies in Transition.
    5. Campos, Nauro F & De Grauwe, Paul & Ji, Yuemei, 2017. "Structural Reforms, Growth and Inequality: An Overview of Theory, Measurement and Evidence," IZA Discussion Papers 11159, Institute for the Study of Labor (IZA).
    6. Jeffrey B. Miller & Stoyan Tenev, 2005. "State and Ownership Reforms in Transition Economics: China vs. the Orthodoxy," Working Papers 05-10, University of Delaware, Department of Economics.
    7. Facundo Alvaredo & Leonardo Gasparini, 2013. "Recent Trends in Inequality and Poverty in Developing Countries," CEDLAS, Working Papers 0151, CEDLAS, Universidad Nacional de La Plata.
    8. Nauro F. Campos & Paul De Grauwe & Yuemei Ji, 2017. "Structural Reforms, Growth and Inequality: An Overview of Theory, Measurement and Evidence," CESifo Working Paper Series 6812, CESifo Group Munich.
    9. Aristei, David & Perugini, Cristiano, 2012. "Inequality and reforms in transition countries," Economic Systems, Elsevier, vol. 36(1), pages 2-10.


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