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Inequality and Well-Being in Transition: Linking Experience and Perception to Policy Preferences

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Abstract

This chapter reviews the dynamics of economic inequality in the region from the early 1990s until today, distinguishing between actual and perceived inequality dynamics. It then looks at whether inequality matters for the well-being of people, and for their policy preferences. The evidence reviewed shows that the early 1990s saw a sharp increase in inequality, although reliable data from that period is patchy. Over the past 2 decades, on the other hand, income inequality has been declining in the majority of transition economies. These dynamics in observed inequality are somewhat at odds with perceptions of inequality being relatively high, and the chapter reviews some of the possible drivers of the discrepancy, with a focus on inequality of opportunity and considerations of fairness.

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Notes

  1. 1.

    In the countries of the European Union, income inequality typically refers to the distribution of disposable income, as recorded, for instance, in statistical instruments such as the European Union Statistics on Income and Living Conditions (EU-SILC). In many of the FSU countries, economic inequality statistics are derived from Household Budget Surveys, which provide a detailed record of household expenditures, but do not always collect information on household incomes.

  2. 2.

    For a more detailed discussion, see Milanovic (2005) and Atkinson (2015).

  3. 3.

    For an accessible summary of the most commonly used inequality metrics, see UN (2015): https://www.un.org/en/development/desa/policy/wess/wess_dev_issues/dsp_policy_02.pdf.

  4. 4.

    Data from the World Bank’s WDI database.

  5. 5.

    See World Bank (2016).

  6. 6.

    Here inequality of opportunity is defined, following Van de Gaer (1993) and Van de Gaer et al. (2001), by a set of circumstances that an individual has no control over (here race and father’s education), such that inequalities across groups defined by different circumstances is taken to indicate inequality of opportunity, and inequalities across individuals within a given circumstance type is indicative of inequality with respect to effort.

  7. 7.

    Perceived inequality of opportunity here is defined in terms of the beliefs with respect to the importance of connections for key opportunities in life (such as a good job or university education).

  8. 8.

    A cross-tabulation of perceptions of inequality of opportunity (IO) and availability of connections generates 4 groups based on whether one perceives inequality of opportunity or not, and whether one has connections or not (IO, connections/IO, no connections/no IO, connections/no IO, no connections). Thus, two separate comparisons are made, varying one characteristic at a time: (i) between those who perceive IO and have connections, and those who perceive IO and do not have connections; and between two groups, both without connections, but one perceiving IO and the other one not.

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Authors and Affiliations

  1. Poverty Equity Global Practice, The World Bank, Washington, DC, USA

    Alexandru Cojocaru

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  1. Alexandru Cojocaru
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Correspondence to Alexandru Cojocaru .

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  1. School of Slavonic and East European Studies, University College London, London, UK

    Elodie Douarin

  2. Carleton University, Ottawa, ON, Canada

    Oleh Havrylyshyn

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Cojocaru, A. (2021). Inequality and Well-Being in Transition: Linking Experience and Perception to Policy Preferences. In: Douarin, E., Havrylyshyn, O. (eds) The Palgrave Handbook of Comparative Economics. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-50888-3_27

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