Income Distribution

One of the most visible outcomes of the systemic change associated with transition from planned to market economies was the rise in income inequality, mainly happening in the first stages. The extent of this change, however, varied remarkably across countries, and more than 25 years after the outset of transition, the picture remains very heterogeneous. While in the early stages of transition the approach to reforms and the macroeconomic conditions determined the pattern of income inequality, in later stages the drivers of wage and income disparities typical of modern market economies became dominant. The chapter provides an empirical and a conceptual overview of income inequality during and after transition in Central-Eastern European, Western Balkan, and Former Soviet Union countries, discussing the complex interplay of the many forces into play.