Economic reform and inequality: evidence from Lithuania

Abstract

Economic reforms in former socialist societies caused massive reallocation of resources, rapid increases in prices and severe erosion in real income and wages with potentially important distributional consequences. Using the Lithuanian Household Budget Survey, this study estimates an expenditure-based inequality index to evaluate the effects of price liberalization policy on inequality. Empirical results suggest that during the early years of reforms, inequality within society showed very little sign of increase. However, since 1994 inequality has increased rapidly: further, inequality has increased at a faster rate among households without children than those with children.