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Inequality in the Western Balkans and former Yugoslavia
Will Bartlett
Visiting Fellow, LSEE & International Inequalities Institute
International Inequalities Institute project: Specific research questions
Together with Gorana Krstic, Jelena Zarkovic Rakisand Nermin Oruc – research questions:
1. What is the extent of income inequality in four Yugoslav successor states, and how much has it changed over the last three decades?
2. What factors determine the level of labour income inequality?
3. What has been the role of different welfare policies in determining the pattern of earnings inequalities?
Welfare system before breakup
• Yugoslav market socialism aimed to reconcile efficiency and equity through “self-management” (workplace democracy) and social ownership
• Adopted an inclusive welfare system based upon mixed principles of contribution and solidarity– combining Bismarckian and Universal systems– major benefits provided on contributory basis (pensions,
health care, unemployment and maternity benefits)– Non-contributory cash benefits (social assistance, child
allowance, war veterans’ benefits)
• All this led to low levels of inequality – In 1968, standardised household income Gini = 0.24
Varieties of capitalism (VoC) in Yugoslav successor states
• Successor states emerged from common institutional background– Path dependency, but:
• Different effects of wars and conflicts• Differences in pace and pattern of privatisation
– Speed of reforms• Early reformers: Croatia and Macedonia• Late reformers: Slovenia and Serbia
• Impact of neo-liberal agenda on welfare reform varied between countries– Primary influence of World Bank and IMF (Bosnia, Serbia), EU
(Slovenia, Macedonia), mixed influences (Croatia)
• Quite different outcomes in terms of inequality• Can VoC paradigm explain this outcome?
– Coordinated market economies versus Liberal market economies
European Values Survey: % of respondents with much confidence in trade unions
12
18
34
53
0
10
20
30
40
50
60
Serbia Croatia Macedonia Slovenia
Gini coefficient of equivalised disposable income before pensions and social transfers
40.443.944.444.9
46.147.447.647.948.048.148.648.749.149.149.349.950.250.851.151.551.651.751.8
53.253.7
55.456.456.7
60.762.4
64.1
0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0
SlovakiaSlovenia
MaltaCzech
NetherlandsFinlandAustriaPoland
BelgiumLuxembourg
ItalyMacedonia
EstoniaLatvia
CroatiaCyprusFrance
SpainIreland
HungaryBulgaria
DenmarkEU-28
RomaniaLithuania
UKGermany
SwedenGreeceSerbia
Portugal
Quantity of employment
• In Serbia, Krstić (2014) using SILC survey data concluded that inequality of incomes of employees is related to:– Quantity and quality of employment
• In Serbia, 18.2% of persons live in households with very low work intensity (10.5% in EU)– Almost 50% of persons in lowest income quintile live
in households with very low work intensity– Related to low participation rate of working age
population due to unemployment and retirement and other reasons
People living in households with very low work intensity (aged 0 to 59 years)
5.76.66.86.97.1
7.47.87.9
8.28.68.7
9.29.29.4
9.810.2
10.710.810.910.9
11.611.611.711.9
14.414.9
15.416.8
17.419.2
21.2
0 5 10 15 20 25
Estonia Czech
Poland Slovakia Slovenia
Latvia Romania
Austria France
Sweden Malta
Lithuania Hungary
Germany Netherlands
EU-28 Finland
Portugal Cyprus
Denmark Bulgaria
Italy UK
Croatia Belgium
Spain Greece
Macedonia Ireland Serbia
Low work intensity and Gini inequality
Croatia
Macedonia
Serbia
Sloveniay = 0.3663x + 26.773
R² = 0.1128
20
22
24
26
28
30
32
34
36
38
40
5 7 9 11 13 15 17 19 21 23
Gin
i co
effi
cie
nt
% of people living in households with very low work intensity
Quality of employment
• In Serbia, three quarters of employed poor do not live in households with low work intensity (Krstić, 2014)– So, low quality of employment contributes to poverty and inequality
• In 2014, 12.9% of employed were part-time workers, 24.1% were self-employed, and 18.2% were temporary workers– Self employed and part-time workers are most exposed to poverty
risk
• Many of the self-employed are informal workers who are outside the social protection system– 22% of employees are informal workers, earning 22% less than formal
workers (Krstić & Sanfey 2011)
• One third of part-time workers are poor, compared to 13% of full time workers– Many part-time workers are in the informal sector, as working part-
time in the formal sector faces very high marginal tax rates due to low progressivity of the Serbian tax system
– In contrast, Slovenia has a progressive system of personal income tax
Own account workers % of total employment
8.5 8.9
13.9
22.2
0
5
10
15
20
25
Croatia Slovenia Macedonia Serbia
Redistributive impact of pensions and social assistance on Gini inequality
24.5
30.4
31.0
33.7
38.2
0 10 20 30 40 50 60 70
SlovakiaSlovenia
CzechFinland
BelgiumNetherlands
SwedenAustria
DenmarkMalta
HungaryLuxembourg
FranceIreland
GermanyCroatiaPolandEU-28
ItalyUK
CyprusMacedonia
PortugalGreece
SpainEstonia
LatviaBulgaria
RomaniaLithuania
Serbia
Gini before SA + P Gini before SA Gini EDI
Linear (Gini EDI) Linear (Gini before SA) Linear (Gini before SA + P)
Gini coefficients in ex-Yugoslavia & EU (%)
52
44
49 49
62
37
30
37 36
46
31
25
3034
38
0
10
20
30
40
50
60
70
EU-28 Slovenia Croatia Macedonia Serbia
Gini before SA + P Gini before SA Gini EDI
Redistributive impact of pensions and social transfers
20.8
19.418.9
15.0
24.2
15.3
13.612.5 12.5
16.6
5.5 5.86.4
2.5
7.6
0
5
10
15
20
25
EU-28 Slovenia Croatia Macedonia Serbia
Effect of social transfers and pensions Effect of pensions Effect of social transfers
Rank order of redistributive effort from pensions and social assistance
2
1213
15
28
30
3
15
24
19
14
31
2
22
26
16
7
31
0
5
10
15
20
25
30
35
Slovenia Macedonia Estonia Croatia Sweden Serbia
Before pensions or social transfers After pensions before social transfers After pensions and social transfers
S80/S20 equivalised disposable income share ratio, 2015
3.53.53.63.6
3.83.8
4.04.14.14.24.34.34.3
4.54.84.9
5.25.25.25.2
5.86.0
6.26.56.56.6
6.97.1
7.58.3
9.0
0 1 2 3 4 5 6 7 8 9 10
CzechSlovakiaSloveniaFinland
BelgiumNetherlands
AustriaDenmark
SwedenMalta
FranceLuxembourg
HungaryIreland
GermanyPolandEU-28
CroatiaCyprus
UKItaly
PortugalEstoniaGreece
LatviaMacedonia
SpainBulgaria
LithuaniaRomania
Serbia
Share of equivalised disposable income by each decile income group, 2015
20.2
22.6
23.9
27.2
0
5
10
15
20
25
30
1 2 3 4 5 6 7 8 9 10
Slovenia
Croatia
Macedonia
Serbia
Income shares of upper, middle and lower class after pensions and social transfers (% of national equivalised disposable income)
33.833.233.132.832.732.131.931.731.7
30.830.730.630.6
29.729.629.329.128.928.228.027.627.226.826.526.326.125.725.524.724.624.0
47.046.6
45.046.247.3
45.547.4
46.045.646.846.746.8
44.846.847.1
46.946.948.5
46.648.0
45.246.747.949.6
48.948.4
48.046.348.2
46.748.8
19.320.2
21.721.020.1
22.320.8
22.322.622.422.722.5
24.623.623.323.924.122.6
25.224.1
27.226.125.323.9
24.825.626.3
28.427.1
28.827.2
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
SlovakiaSlovenia
Czech RepublicFinland
SwedenNetherlands
BelgiumAustria
DenmarkHungary
LuxembourgMalta
FranceGermany
IrelandPoland
EUCroatia
UKItaly
CyprusPortugal
GreeceMacedonia
SpainEstonia
LatviaBulgaria
RomaniaLithuania
Serbia
Lower class (bottom 50%) Middle class (40%) Upper class (top 10%)
Variation of income shares• Income shares of the
middle class are much less variable than of the lower or upper classes
• Middle classes are protected by their “sharp elbows” or “voice”
• Upper classes in predatory societies extract surplus from the lower classes
• Easier to do where political power is concentrated in economic-political elite
S.D Mean C.V
Lower
class2.836 29.145 0.097
Middle
class1.157 47.006 0.025
Upper
class2.420 23.871 0.101
S.D.= Standard deviation
CV = Coefficient of variation
Shares of disposable income gained by top 1% (% of national equivalised income), 2015
3.33.4
3.83.9
4.04.04.0
4.14.2
4.34.3
4.44.54.5
4.74.7
4.84.8
4.95.25.25.2
5.55.6
5.86.0
6.46.5
7.17.5
8.3
0 1 2 3 4 5 6 7 8 9
SlovakiaSlovenia
CroatiaMacedonia
BelgiumMalta
FinlandCzech
SwedenEstonia
HungaryPolandIreland
SpainItaly
AustriaLatvia
NetherlandsLuxembourg
EU-28GermanyPortugal
FranceGreece
DenmarkUK
BulgariaSerbia
LithuaniaCyprus
Romania
Why does inequality differ between countries of former Yugoslavia?
• Explanation 1: Varieties of capitalism and paths of transition– The gradual corporatist Slovenian transition was egalitarian, while the
delayed shock therapy neoliberal Serbian transition was more extractive of the surplus from lower class workers generating relatively high levels of poverty
• Explanation 3: Labour market institutions– Differences in the quantity and quality of jobs may contribute to an
explanation of the differences in inequality between these countries– Linked to degree of resistance to labour market reforms– And to progressivity or regressivity of tax system and consequent
extent of informality
• Explanation 2: Elite composition and forms of political capitalism– The Slovenian elite was formed of ex-nomenklatura elements who
resisted reforms, while the Croatian elite was reconstituted by members of the HDZ party and the diaspora who supported rapid but incomplete privatisation
Thank you for your attention !!!