Author: Branko Milanovic and Lire Ersado
Publication: Economies in Transition: The Long-Run View. Chapter 3, pp. 84-108
Publisher: Palgrave Macmillan
Editor: Gérard Roland
Date: 2012
Abstract:
Inequality considerations are important to policy makers because they are linked not only to the economic state of affairs but also to social and political conditions of a given country. This is even more the case in the countries of Eastern Europe (EE) and the former Soviet Union (FSU) that underwent transition from state-controlled to market economy in the era of globalization. However, there are a limited number of rigorous empirical studies on the evolution of inequality in the transition economies. Although there is a lack of consensus on the impact of inequality on economic growth, the limited empirical evidence that has recently become available for the transition countries shows that the effect of inequality on growth can be negative and robust (e.g., Ferreira 1999; Ivanova 2006; Sukiassyan 2007). We start with a brief review of the literature on the determinants of inequality in transition countries, with particular emphasis on the role of institutions and government policies pursued under the new economic order following transition. The study then attempts to investigate the causes of, and establish some stylized facts about, the changes in inequality using a rich database of household surveys collected over the period 1990–2005.