Income Distribution During and After Transition: A Conceptual Framework

The transformation from planned to market economies undertaken after 1989 by all new European Union members (NEUMs), former Soviet Union countries (FSU) and Western Balkans (WBs) is a fascinating, extremely complex phenomenon. Extensive market-oriented reforms were implemented in all fields, while many of the rules characterising the pre-transition society were rapidly dismissed. State influence was radically weakened in favour of market liberalisations, firm privatisations and international opening to trade and foreign investments. The whole process allowed the existing visible and hidden inequalities to develop, and new ones, associated with restructuring and vast structural change, to unfold. During the 1990s, distributional patterns in the Formerly Planned Economies evolved at quite a different pace, with inequalities reaching, and in some cases stabilising at, diversified levels after more than 20 years of transition (Aristei and Perugini, 2012). Due to the complexity of the forces into play (economic, social, political and institutional), the study of any aspect of transition is in itself a challenging task; but when distributive patterns are the focus of the analysis, the picture becomes even more intriguing and complicated. This is due not only to the fact that inequality is in itself a multifaceted concept that can then be looked at from many different and complementary perspectives, but also to the fact that basically every social, economic, structural and institutional change affects the distribution of income, either directly or indirectly.