Inequality in transition countries: The contribution of markets and government taxes and transfers

This paper examines inequality patterns in the 1990s in Poland, Russia and Hungary. We consider three different definitions of income and analyse the contributions to inequality of their main components using LIS micro data. Inequality is measured using the Gini and Theil indices, which in turn are decomposed by source using two alternative approaches (the Shorrocks' axiomatic approach and the Theil-based decomposition). The role of transfers and taxes in mitigating total inequality during the transition period is highlighted, as are the contributions of market factors.