Earnings Disparities and Income Inequality in CEE Countries: An Analysis of Development and Relationships

Abstract

The potential in survey data for the study of simultaneous changes in earnings disparities, inequality of household income, and the connections between them has thus far been underexploited. This paper presents various data on four Central and East European (CEE) countries and, for the sake of comparison, partially on Austria and Germany. First, it compares the changes in both distributions over time since the communist period as reported in various sources and asks: how much did disparities and inequalities increase during the transition? Second, it presents the attempts that have been made so far to analyse the connections between the two distributions and asks: how should the association between personal and household earnings be analysed and what do we know about its development? Third, it presents the changing links between earned and disposable income in CEE countries using LIS data for history and EU-SILC data for the present time, asking how strong was and currently is the association and how the countries differ in packaging family income? Various sources confirm that earnings disparities and income inequalities rose more or less in all four CEE countries after 1989. This is apparent in the individual countries in various phases of their transition. In contrast, no increase occurred from 2004 to 2007, according to the EU-SILC surveys.