Economic Transformation and Income Distribution: Some Evidence From the Baltic Countries
IMF Working Papers, March 1, 1996
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- Economic Transformation and Income Distribution: Some Evidence From the Baltic Countries
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Bibliographic details
- Authors: Beatrice Weder, Peter Cornelius
- Published: March 1, 1996
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451843071.001
Summary and central findings
- A transition from a centrally planned to a market economy implies a massive reallocation of resources requiring realignments in relative prices, which may have important distributional effects.
- The paper examines the extent to which income differentials have changed in countries where bold reforms have been introduced, focusing on the Baltic states.
- It finds that—largely due to a significant increase in the dispersion of earnings—recorded income differentials in these countries have widened markedly.
- The redistributive effects of social assistance and tax policies have been only marginal.
Subject focus and keywords
- Subject areas: Expenditure, Income distribution, Income inequality, Labor, National accounts, Personal income, Social assistance spending, Wages
- Keywords: Baltics; country; household income; income; income component; income datum; income differential; Income distribution; Income inequality; Personal income; size distribution income; Social assistance spending; Wages; WP
Policy implications and interpretation
- Income dispersion increases during rapid economic transformation can substantially widen measured income differentials.
- Existing social assistance and tax policies, as observed in the Baltic experience covered by the paper, had only marginal redistributive impact during the transition period.
- Implication: reforms that generate large increases in earnings dispersion may require stronger or better-targeted redistributive instruments to limit widening income differentials.