Factors Influencing Income Inequality In Transition Economies
A sharp rise of income inequality in the transition countries has caused a wide-ranging discussion about the factors affecting inequality. The present paper investigates a number of factors that influence income inequality in the transition countries. The main contribution of the study lies in its different approach to analysing these factors. While previous studies have either mainly focussed on single factors of inequality or have used regression analysis involving but a few factors, the author of the present paper uses principal component analysis in order to analyse as many different indicators as possible and at the same time avoid the problem of possible multicollinearity. As a result, four components are formed from the initial indicators. The impact of these components on income inequality and the component scores are then analysed.
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