Inequality and Welfare

Abstract

The chapter summarizes recent trends in inequality in the Emerging European Economies (EEE) since the Great Financial Crisis (GFC) of 2008-2009 and analyses potential effects of the Covid crisis on income distribution in these societies. Inequality paths diverged between 2009 and 2019: while disposable income inequality markedly increased in Bulgaria and, to a lesser extent, in Hungary, in Poland the Gini index declined, and in other countries income inequality remained stable. The relative at-risk-of-poverty rate showed fluctuations in 2009-2019, while absolute poverty – measured by the indicator of severe material deprivation – declined, mirroring economic growth and the general convergence process of the EEE. The second part of the chapter describes the inequality impacts of the Covid crisis. As data on the income distribution of the relevant years (2020, 2021) are not yet available, analyses of inequality simulate impacts using various methods. Studies that focus on the inequality of disposable income consider both labour market effects of lockdowns and the effect of various policy measures (including the usual measures and new policies such as wage compensation schemes). Studies based on actual employment changes during the first wave of the pandemic have found that among the EEE, Bulgaria and Hungary showed increases in the at-risk-of-poverty rate higher than the EU average. The chapter also warns that the success in building prosperous and inclusive societies largely depends on the portfolio of institutions, values, and behaviours. Full-fledged effects of the Covid crisis will depend on the way policies are changed both in labour markets and in the health sectors.