A Gini decomposition analysis of inequality in the Czech and Slovak Republics during the transition

Disposable income inequality, as measured by the Gini coefficient and using the Family Budget Survey data, increased very little, and by a similar amount, from 1989 to 1993 in the Czech Republic and Slovakia. This surprising result is examined with an analysis of changes in the channels of redistribution and a Gini decomposition. We find that the sizeable increase in overall inequality due to changes in the wage earnings component is mitigated by changes in the tax and transfer components in both republics. As for the relative effects of government policies, changes in the transfer component contributed more than changes in the tax component to lowering the growth of inequality in the Czech Republic, while the reverse was true for Slovakia.