Earnings disparities and income inequality in CEE countries: an analysis of development and relationships

The potential provided by survey data for studying simultaneous changes in earnings disparities, inequality of household income, and the connections between them has thus far been underexploited. This paper presents various data on four Central and East European (CEE) countries, as well as some data on Austria and Germany for the sake of comparison. First, it compares the changes in both distributions over time since the communist period as reported in various sources to see how much disparities and inequality increased during the transition. Second, it presents the attempts that have been made so far to analyze the connections between the two distributions and examines how the relationship between personal and household earnings should be analyzed and what we know about its development. Third, it presents the changing links between earned and disposable income in CEE countries, using Luxembourg Income Study data as a historical baseline and the Statistics on Income and Living Conditions (EU-SILC) data for the present time to determine how strong the association was and currently is, and how the countries differ in packaging family income. Various sources confirm that earnings disparities and income inequality rose at least to some degree in all four CEE countries after 1989. This is apparent in the individual countries in various phases of their transitions. In contrast, no increase occurred from 2004 to 2007, according to the EU-SILC surveys.