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Reform and inequality during the transition: An analysis using panel household survey data, 1990-2005

Author

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  • Milanovic, Branko
  • Ersado, Lire
Abstract
Using for the first time survey data from 26 post-Communist countries, covering the period 1990-2005, the paper examines correlates of unprecedented increases in inequality registered by most of these economies. We find that, after controlling for country-fixed effects and type of survey used, economic reform (measured by the EBRD index) is strongly negatively associated with bottom deciles’ income shares and positively with income shares of the top two deciles. However, once economic reform is broken into its different component parts, the picture is more nuanced: large-scale privatization and infrastructure reform (mostly consisting of privatization and higher fees) are responsible for this pro-inequality effect while small-scale privatization tends to raise income shares of the bottom deciles. Acceleration in growth is also pro-rich. On the other hand, democratization (measured by the Polity measure) is strongly pro-poor, as is lower inflation. Somewhat surprisingly, we find no evidence that higher government spending as share of GDI reduces inequality.

Suggested Citation

  • Milanovic, Branko & Ersado, Lire, 2008. "Reform and inequality during the transition: An analysis using panel household survey data, 1990-2005," MPRA Paper 7459, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:7459
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    References listed on IDEAS

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    1. Mitra, Pradeep & Yemtsov, Ruslan, 2006. "Increasing inequality in transition economies : is there more to come?," Policy Research Working Paper Series 4007, The World Bank.
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    Cited by:

    1. Tilman Brück & Damir Esenaliev, 2018. "Post†socialist transition and intergenerational educational mobility in Kyrgyzstan," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 26(1), pages 61-89, January.
    2. Vesselin Mintchev & Venelin Boshnakov & Alexander Naydenov, 2010. "Sources of Income Inequality: Empirical Evidence from Bulgaria," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 4, pages 39-64.
    3. Filip Novokmet & Thomas Piketty & Gabriel Zucman, 2018. "From Soviets to oligarchs: inequality and property in Russia 1905-2016," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 16(2), pages 189-223, June.
    4. Riccardo Rovelli & Anzelika Zaiceva, 2013. "Did support for economic and political reforms increase during the post-communist transition, and if so, why?," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 21(2), pages 193-240, April.
    5. Golinelli, Roberto & Rovelli, Riccardo, 2013. "Did growth and reforms increase citizens' support for the transition?," European Journal of Political Economy, Elsevier, vol. 30(C), pages 112-137.
    6. Jens Holscher & Cristiano Perugini & Fabrizio Pompei, 2011. "Wage inequality, labour market flexibility and duality in Eastern and Western Europe," Post-Communist Economies, Taylor & Francis Journals, vol. 23(3), pages 271-310.
    7. David Aristei & Cristiano Perugini, 2014. "Speed and Sequencing of Transition Reforms and Income Inequality: A Panel Data Analysis," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 60(3), pages 542-570, September.
    8. Sergei Guriev & Ekaterina Zhuravskaya, 2009. "(Un)happiness in Transition," Journal of Economic Perspectives, American Economic Association, vol. 23(2), pages 143-168, Spring.
    9. Nataša Kump & Filip Novokmet, 2018. "Top incomes in Croatia and Slovenia, from 1960s until today," PSE Working Papers hal-02878175, HAL.
    10. Nauro F. Campos & Paul De Grauwe & Yuemei Ji, 2017. "Structural Reforms, Growth and Inequality: An Overview of Theory, Measurement and Evidence," CESifo Working Paper Series 6812, CESifo.
    11. Facundo Alvaredo & Leonardo Gasparini, 2013. "Recent Trends in Inequality and Poverty in Developing Countries," CEDLAS, Working Papers 0151, CEDLAS, Universidad Nacional de La Plata.
    12. Jir Vecern k, 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.
    13. Pawel Bukowski & Filip Novokmet, 2018. "Inequality in Poland: Estimating the whole distribution by g-percentile 1983-2015," LIS Working papers 731, LIS Cross-National Data Center in Luxembourg.
    14. repec:wsr:wpaper:y:2010:i:047 is not listed on IDEAS
    15. Bonev, Pavlin, 2013. "Government Intervention in Postsecondary Education in Bulgaria," MPRA Paper 52669, University Library of Munich, Germany.
    16. R. Rovelli & A. Zaiceva, 2011. "Individual support for economic and political changes: Evidence from transition countries, 1991-2004," Working Papers wp736, Dipartimento Scienze Economiche, Universita' di Bologna.
    17. Nataša Kump & Filip Novokmet, 2018. "Top incomes in Croatia and Slovenia, from 1960s until today," Working Papers hal-02878175, HAL.
    18. Frederic Pryor, 2015. "A Note on Income Inequality in East Europe," LIS Working papers 643, LIS Cross-National Data Center in Luxembourg.
    19. Bojana Radovanovic & Dragan Filimonovic, 2012. "Developments in the Available Inequality Indexes for the Western Balkan Countries: Trends in the last 10 Years," Book Chapters, in: Paulino Teixeira & António Portugal Duarte & Srdjan Redzepagic & Dejan Eric (ed.), European Integration Process in Western Balkan Countries, edition 1, volume 1, chapter 22, pages 435-454, Institute of Economic Sciences.
    20. Nina Lopez Uroz, 2020. "Populism Amidst Prosperity: Poland's Growth Model and its Socio-Political Outcomes," LEQS – LSE 'Europe in Question' Discussion Paper Series 159, European Institute, LSE.
    21. Slawomir Kuzmar & Dawid Piatek, 2019. "Institutional determinants of inequality in chosen post-socialist countries: the role of political freedom," Ekonomia i Prawo, Uniwersytet Mikolaja Kopernika, vol. 18(3), pages 295-315, September.
    22. Tilman Brück & Damir Esenaliev, 2013. "Post-Socialist Transition and the Intergenerational Transmission of Education in Kyrgyzstan," Discussion Papers of DIW Berlin 1284, DIW Berlin, German Institute for Economic Research.
    23. Nataša Kump & Filip Novokmet, 2018. "Top incomes in Croatia and Slovenia, from 1960s until today," World Inequality Lab Working Papers hal-02878175, HAL.

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    More about this item

    Keywords

    Inequality; transition; economic policy;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • P2 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies
    • P20 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - General

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