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Changing Welfare in a Changing World? Income and Expenditure Inequalities in the Czech and Slovak Republics

Thesia I. Garner


The question addressed in this research is how changes in the first years of the transition in the Czech and Slovak republics are reflected in the income and expenditure distributions of households. Using data from the 1989 and 1992 Czech and Slovak Family Budget Surveys (FBS), flow income and consumption expenditure inequalities are examined. Overall inequality results are presented in addition to decomposition results by income sources and expenditure components. Contrary to expectations, household per capita income and expenditure inequality decreased marginally or changed little for the two republics from 1989 to 1992 for households represented by the FBS samples (households headed by workers, employees, those working in agriculture, and pensioners without economically active members). Findings in this study suggest that the trend toward greater income equality has resulted from transfer benefits becoming more targeted to those with lower incomes, wage taxes becoming more progressive, pension incomes being indexed, and an increasing proportion of persons in the total population living in pensioner households. In both republics, aggregate equalizing effects on aggregate expenditure inequality are from changes in private transportation expenditures, in part resulting from the removal of subsidies for basic commodities. The trend toward greater equality is also likely to be related to the FBS methodology; for example, by 1992, a smaller percentage of population households were represented by the FBS sample design than in 1989.