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Distributional Implications of the Economic Development in the Baltics: Reconciling Micro and Macro Perspectives

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Abstract

The aim of this paper was to analyse distributional implications of the economic development reflected at the macro level in the Baltics. We demonstrated how the concepts of income and its measurement at macro and micro levels can be reconciled using data recorded in the EU Survey on Income and Living Conditions (EU-SILC) and National Accounts. We found that household incomes in the Baltics diverge and lag behind incomes reflected at the macro level. This was especially true for two income categories: property and mixed incomes. Average gaps in social benefits and taxes were small, and these were medium for wages and salaries. Adjusting incomes in EU-SILC to cover the observed gaps resulted in increase in income inequality indicators for all three countries, especially for Latvia and for the period of resumed economic growth following the latest economic crisis in Lithuania. Hence, divergences between macro and micro level accounts on incomes hide potentially higher levels of income inequality than shown in official distributional statistics.

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Fig. 1

Source: calculations by authors based on Eurostat (2016). Note available counties only. Ireland 1998, Croatia 2000 instead of 1995

Fig. 2

Source: calculations by authors based on National Accounts, Eurostat

Fig. 3

Source: calculations by authors

Fig. 4

Source: calculations by authors based on EU-SILC. Note estimates lagged by 1 year to correspond to the income reference period. Income equivalized using modified OECD scale

Fig. 5

Source: see previous

Fig. 6

Source: see previous

Fig. 7

Source: see previous. Note time-period lagged by one year (t − 1) to correspond to the income reference period in EU-SILC

Fig. 8

Source: see previous. Note time-period lagged by one year (t − 1) to correspond to the income reference period in EU-SILC

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Notes

  1. Calculations by the authors based on Eurostat (2016).

  2. In National Accounts the economy is divided into five mutually exclusive institutional sectors: (a) non-financial corporations sector, (b) financial corporations sector, (c) general government sector, (d) household sector and, (e) non-profit institutions serving households (NPISHs) sector.

  3. For further the details see the link: Eurostat.Template:Database http://epp.eurostat.ec.europa.eu/portal/page/portal/income_social_inclusion_living_conditions/introduction.

  4. For detailed list of variables under each income component see Eurostat (2013).

  5. EU-SILC data is available for the three Baltic countries since 2005 (income reference period of 2004). We used the available data since 2007 due to technical limitation and inconsistencies in the income components in the initial waves in Latvia.

  6. For further the details see the link: Eurostat.Template:Database http://epp.eurostat.ec.europa.eu/portal/page/portal/income_social_inclusion_living_conditions/introduction.

  7. See EU-SILC Description Target Variables. Accessed on 05/06/16, source: http://ec.europa.eu/eurostat/documents/1012329/4462345/EU-SILC-sample-size.pdf/1d70e0a7-5761-4adf-8ecb-e464d253b845.

  8. See EU-SILC National quality reports for detail. Accessed on 05/06/16, source: http://ec.europa.eu/eurostat/web/income-and-living-conditions/quality/eu-and-national-quality-reports.

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Acknowledgements

This research was funded by a Grant (No. GER - 007/2015) from the Research Council of Lithuania. We are grateful for participants of the 23rd International FISS Conference for valuable comments and suggestions on the paper.

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  1. Department of Social Policy and Social Work, Faculty of Philosophy, Vilnius University, Universiteto Str. 9/1, Vilnius, Lithuania

    Jekaterina Navickė

  2. Department of Economics, Faculty of Economics, Vilnius University, Sauletekio Str. 9, Vilnius, Lithuania

    Romas Lazutka

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Correspondence to Jekaterina Navickė.

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Navickė, J., Lazutka, R. Distributional Implications of the Economic Development in the Baltics: Reconciling Micro and Macro Perspectives. Soc Indic Res 138, 187–206 (2018). https://doi.org/10.1007/s11205-017-1645-x

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