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Main Drivers of Income Inequality in Central European and Baltic Countries: Some Insights from Recent Household Survey Data

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  • Zaidi, Salman

    () (The World Bank)

Abstract

Present levels of income inequality in Czech Republic, Estonia, Latvia, Lithuania, Hungary, Poland, Slovakia, and Slovenia remain considerably higher than their pre-transition levels, although the relative pace of change over time has varied quite a bit across countries. Using data from the 2006 European Union Survey of Income and Living Conditions, this paper finds that prevailing levels of income inequality in these countries continue to be low by international standards, and that this is in large part due to the very high redistributive impact of direct taxes and public transfers. In addition to the instrumental role of tax and transfer policies in redistributing income, the paper highlights the important role played by differences in education levels and labor market participation rates in explaining observed inequalities across people and across different regions (although not in explaining observed differences across countries). The paper includes an analysis of key factors that help explain observed variation across countries in the level of public support for redistribution, including peoples' economic background and relative success in life, whether they perceive poverty to be associated with factors within or outside the control of those it afflicts (for example, laziness/lack of willpower vs. injustice in society).

Suggested Citation

  • Zaidi, Salman, 2009. "Main Drivers of Income Inequality in Central European and Baltic Countries: Some Insights from Recent Household Survey Data," Policy Research Working Paper Series 4815, The World Bank.
  • Handle: RePEc:wbk:wbrwps:4815
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    References listed on IDEAS

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    Cited by:

    1. Ivica Urban, 2014. "Contributions of taxes and benefits to vertical and horizontal effects," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 42(3), pages 619-645, March.
    2. World Bank, "undated". "World Bank East Asia and Pacific Economic Update 2011, Volume 1 : Securing the Present, Shaping the Future," World Bank Other Operational Studies 14713, The World Bank.
    3. Jirí Vecerník, 2010. "Earnings Disparities and Income Inequality in CEE Countries: An Analysis of Development and Relationships," LIS Working papers 540, LIS Cross-National Data Center in Luxembourg.

    More about this item

    Keywords

    accounting; Average income; average incomes; average share; calculations; capital investments; cash transfers; client country; consumer; consumer durable; Contribution; Cross-country comparisons;

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