When is there a Kuznets curve?
This paper investigates when is there a Kuznets curve, that is, under which conditions economic growth is associated with a decline in income inequality. The analysis is done on a sample of 26 ex-socialist countries from Eastern Europe, during the post-socialist years. These countries had very similar characteristics when socialism collapsed, but very di¤erent experiences with the transition afterwards, which makes them a suitable group for analysing the relationship between GDP and in- equality. We focus on four factors that may shape this relationship - labour market institutions, market power of companies, social bene?ts and taxes. Findings suggest that inequality (before government re- distribution) declines with economic growth when labour markets are more regulated, anti-monopoly policy is more exective and taxes are higher. Taxes seem to be the single most important factor.
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