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Dynamics of income inequality and welfare in Latvia in the late 1990s

Author

Listed:
  • Fofack, Hippolyte
  • Monga, Celestin

Abstract

This paper analyzes the dynamics of poverty and income inequality during the recovery phase of the transition that characterized the Republic of Latvia in the late 1990s. Despite a continued rise in income inequality, empirical evidence suggests an improvement in living standards, owing largely to a significant surge in per capita income growth, particularly in urban areas. In a context of rising income inequality and widening urban-rural income and poverty gaps, the benefits of growth were not equally distributed, and poverty persisted in a number of regions (particularly the regions of Latgale and Vitzeme) and among some socioeconomic groups (particularly households deriving their main income from social benefits). In addition to income inequality and asset endowments, poverty appears to be highly correlated with a number of labor market-related variables, particularly unemployment, suggesting that the labor market could be an important transmission channel from growth to poverty. However, though positive, the association between poverty and unemployment is non linear, especially in urban areas, where the labor market and demand are the most important channels of transmission through which growth and macroeconomic development affect household income and living standards.

Suggested Citation

  • Fofack, Hippolyte & Monga, Celestin, 2004. "Dynamics of income inequality and welfare in Latvia in the late 1990s," Policy Research Working Paper Series 3336, The World Bank.
  • Handle: RePEc:wbk:wbrwps:3336
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    References listed on IDEAS

    as
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    2. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-766, May.
    3. Ravallion, Martin, 2001. "Growth, Inequality and Poverty: Looking Beyond Averages," World Development, Elsevier, vol. 29(11), pages 1803-1815, November.
    4. Canagarajah, Sudharshan & Mazumdar, Dipak & Xiao Ye, 1998. "The structure and determinants of inequality and poverty reduction in Ghana, 1988-92," Policy Research Working Paper Series 1998, The World Bank.
    5. Christopher Heady & Theodore Mitrakos & Panos Tsakloglou, 2001. "The distributional impact of social transfers in the European Union: evidence from the ECHP," Fiscal Studies, Institute for Fiscal Studies, vol. 22(4), pages 547-565., December.
    6. Ravallion, M., 1992. "Poverty Comparisons - A Guide to Concepts and Methods," Papers 88, World Bank - Living Standards Measurement.
    7. Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762.
    8. Kakwani, Nanak, 1993. "Poverty and Economic Growth with Application to Cote d'Ivoire," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 39(2), pages 121-139, June.
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