Redistributive Policy in a Transition Economy: The Case of Hungary

This study examines the scope for redistributive government policies based on progressive income taxation and direct income transfers. We concentrate on the case of Hungary. We first survey recent developments in the economic circumstances of the household sector and changes in the Hungarian tax-benefit system. We then examine the changing redistributive role of the personal income tax system. Finally, we consider the redistributive potential for various types of income transfer, using optimal targeting techniques. The analysis is based on data from the 1991 Hungarian Household Budget Survey.