Simon Commander

Channels of redistribution: Inequality and poverty in the Russian transition

Contrary to popular perception, Russia entered the transition with significant inequality. Using the large Russian Longitudinal Monitoring Survey dataset, we demonstrate that inequality has subsequently risen yet further and by end-1996 was roughly comparable to inequality in Mexico, Colombia or Malaysia. Driving this increase has been not only wealth transfers through privatization but also changes in government expenditure and a sharp growth in earnings dispersion. There has been a large, associated shift in the structure of income. The paper also looks at the incidence and depth of poverty over the period 1992-96. At the start of transition, roughly half the population of households fell below the poverty line. While this has subsequently declined, at end-1996 nearly 40 percent of households were below the poverty line and a substantial stratum of households were locked in chronic poverty.

On the Dynamics of Inequality in the Transition

Inequality has increased in many of the transition economies. At the same time, spending on education has declined. In this paper we survey the factors driving these changes. We then set up a small general equilibrium model to simulate the effect of different policy choices on the path of inequality over the transition. We show that the policies selected in Central Europe engender a relatively rapid spike in inequality but with a Kuznets curve. In the simulations that broadly capture features of the policy regime dominating in Russia and the FSU, we find no Kuznets curve. We then turn to the longer run and look at the way in which both trade liberalization and technological and organizational change are likely to affect the relative demand for types of labour. We show how substantial technological and organizational change - obvious features of transition - can result in raising inequality. Persistence in inequality can be expected to depend critically on the pace at which the acquisition of skills takes place in the economy - and, hence, on the evolution of the educational system. As such, policies aimed at raising adaptability - such as quality educational systems - can be expected to dampen the increase in wage inequality.

Unemployment, restructuring and the pace of transition

The transition in Central and Eastern Europe (CEE) has left behind in its wake a flotsam of discarded technologies, trading arrangements and, perhaps most painful of all, a large mass of people without work and with, it would appear, small chances of being reintegrated into the labour force. By early 1996 around 12 per cent of the labour force was unemployed, and of those more than 40 per cent had been out of work for over one year. Wide regional disparities emerged early in the transition and these have remained. While the generosity of publicly provided unemployment benefits has been cut back and unemployment status is quite tightly correlated with poverty, those without work still retain access to significant public transfers. And despite a clear and widespread resurgence in growth since 1993/94 and the associated stimulus to job creation imparted by the private sector, unemployment has declined only very gradually.

Labor markets in North Africa and the Near East: a survey of developments since 1970.

It is normally the case that the shares of national income and employment accounted for by agriculture are lower in economies with higher aggregate levels of development. Yet, where resources become available to an economy through windfall gains, or where macro-economic policies discriminate against the agricultural sector, certain features of development may occur in transitory or disequilibrated form. Such outcomes have commonly been associated with the discovery and exploitation of natural resources. The subsequent economic booms have not only raised the trend rate of growth but have, where the boom phase was long enough, had an impact on the sectoral distribution of resources. A windfall tends to generate resource shifts through competing uses for factors, associated with resource movement towards non-tradeables and away from tradeables. Where economies have, prior to the boom period, been largely characterized by the dominance of the agricultural sector, this implies a shift of resources away from that sector.