|
Abstract:
While income inequality during socialism was considerably lower than in other countries at comparable levels of development, it increased significantly in all Central and East European states after the fall of communist regimes. Nevertheless, some postsocialist countries managed to maintain comparatively low inequality levels ten years into the transition period while inequalities have sky-rocketed in other states. What explains these differences? This paper is one of the first longitudinal cross national analyses of the factors that determine income inequality in ten Central and East European countries in the first decade after 1989. Results from random and fixed effects regression analyses suggest that the established Kuznets' theory for explaining income inequality for Western transitions to capitalism is inappropriate for a very different socio-historic setting of East European transformations. Rather, for this case we find that rising income inequality is principally related to the processes of privatization, whereby private sector expands, foreign investment increases and state redistribution decreases, as well as social exclusion of ethnic minorities during the time of heightened ethnonationalist sentiments in postsocialism. These findings point to the social foundations of economic inequality trends and substantiate the utility of a context sensitive, rather than universalistic, explanation of income inequality.
|
