Income inequality in early transition: The case of Hungary 1987-1996

We analyze household budget sun ey data to examine income inequality in Hun gary between 1987 and 1996. Inequality did not increase significantly betwe en 1987 and 1991. However, after 1991, the increase was substantial. Fallin g real incomes and taxes and state transfers may have held back inequality in the early transition. However, growth in earnings inequality, and increa sing diversity in sources of household incomes, interacted to increase ineq uality between 1991 and 1996. This was exacerbated by an emerging polarizat ion in state transfers, i.e., between earnings-related pensions and other b enefits. In the context of sustained economic growth, the increase in inequ ality could accelerate. J. Comp. Econ., March 2001, 29(1), pp. 40-65. Depar tment of Applied Economics and Corpus Christi College, University of Cambri dge, Cambridge CB3 9DE, United Kingdom; Social Policy Research Center, The University of New South Wales, Kensington 2052, New South Wales, Australia. (C) 2001 Academic Press.