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

29 Pages Posted: 20 Apr 2016

Date Written: January 1, 2009

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).

Keywords: Inequality, Rural Poverty Reduction, Emerging Markets, Poverty Impact Evaluation

Suggested Citation

Zaidi, Salman, Main Drivers of Income Inequality in Central European and Baltic Countries - Some Insights from Recent Household Survey Data (January 1, 2009). World Bank Policy Research Working Paper No. 4815, Available at SSRN: https://ssrn.com/abstract=1327284

Salman Zaidi (Contact Author)

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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