Taking Down the Wall: Transition and Inequality

IMF Working Papers, February 14, 2020

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Taking Down the Wall: Transition and Inequality

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Bibliographic details

• Authors: Serhan Cevik, Carolina Correa-Caro
• Published: February 14, 2020
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781513527871.001

Research question and scope

• Investigates the main determinants of income inequality in transition countries during the period 1990–2018.
• Focus on cross-country empirical analysis with attention to the potential endogeneity of income growth.

Methodology

• Two-pronged empirical strategy:
  • Instrumental variable (IV): trading partners’ weighted average real GDP.
  • Estimation methods:
  • Two-stage least squares (2SLS) for static models.
  • Generalized Method of Moments (GMM) for dynamic models.

Key empirical findings

• Evidence consistent with the Kuznets curve, indicating a nonlinear relationship between income inequality and the level of economic development.
• The redistributive impact of fiscal policy is statistically insignificant.
• Taxation and government spending appear to have opposing effects on income inequality in transition economies.

Data, subjects, and keywords

• Period covered: 1990–2018.
• Subjects: Expenditure, Fiscal policy, Income distribution, Income inequality, National accounts, Personal income.
• Keywords include: Central and Eastern Europe, economy, estimate, fiscal policy, fiscal policy instrument, Gini coefficient, Global, gross Gini coefficient, Income distribution, income equality, income inequality, income redistribution, institutional performance, net, net Gini coefficient, Personal income, series from the SWIID database, transition economies, WP.

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