Growth, Income Distribution, And well-Being In Transition Countries

In this paper we use several well-being measures that combine
average income with a measure of inequality to undertake
international and intertemporal well-being comparisons in
transition countries. Our well-being measures drastically change
the impression of levels and changes in well-being from a
traditional reliance on income measures. They also significantly
affect the ranking of countries, when compared to rankings based on
real incomes. Due to low inequality and moderate income levels,
socialist countries enjoyed relatively high levels of economic
well-being. In the transition process, rising inequality and
falling incomes have led to a dramatic decline in well-being in
many transition countries, and a corresponding worsening in rank
when compared to other countries. There is great variance in the
income and inequality performance of transition countries. We find
a close correlation between income losses and inequality increases
suggesting the ability of appropriate policies to reduce the income
losses and reduce rising inequality. While the political dimension
of transformation remains largely successful, our indicators
suggest that most transition countries have yet to reach the level
of economic well-being enjoyed in the late 1980s.