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Inequality, Transfers and Growth; New Evidence From the Economic Transition in Poland

  • Eswar Prasad
  • Michael P. Keane

This paper challenges the conventional wisdom that inequality in Poland increased markedly during the economic transition. Income and consumption inequality actually declined in 1990-92 and rose only moderately above pre-transition levels by 1997. However, inequality in labor earnings increased markedly and consistently during 1990-97. Social transfer mechanisms, including pensions, helped mitigate increases in overall inequality and poverty. More importantly, these transfer mechanisms were well-designed to reduce political resistance to market-oriented reforms in the early years of transition, paving the way for rapid growth. Cross-country evidence from transition economies is consistent with this interpretation and with recent literature suggesting that inequality-reducing redistribution can enhance growth.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 00/117.

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Length: 52
Date of creation: 01 Jun 2000
Date of revision:
Handle: RePEc:imf:imfwpa:00/117
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