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Income inequality and redistribution in Lithuania: The role of policy, labor market, income, and demographics

Nerijus Černiauskas, Denisa Sologon, Cathal O'Donoghue and Linas Tarasonis

No 60, GRAPE Working Papers from GRAPE Group for Research in Applied Economics

Abstract: We model the household disposable income distribution in Lithuania and explore the drivers of the increase in income inequality between 2007 and 2015. We quantify the contributions of four factors to changes in the disposable income distribution: (i) demographics; (ii) labor market structure; (iii) returns and prices; and (iv) tax–benefit system. Results show that the effects of the factors were substantial and reflected heterogeneous developments over two subperiods: changes in the tax and benefit system cushioned a rapid rise in market income inequality because of the global financial crisis during 2007–2011, but failed to do so during the subsequent years of economic expansion, when rising returns in the labor and capital markets significantly increased disposable income inequality. We also find that declining marriage rates contributed to the increase in income inequality in Lithuania.

Keywords: income inequality; redistribution; decompositions; microsimulation; tax-benefit policies. (search for similar items in EconPapers)
JEL-codes: D31 H23 J21 (search for similar items in EconPapers)
Pages: 68 pages
Date: 2021
New Economics Papers: this item is included in nep-cmp and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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http://grape.org.pl/WP/60_CerniauskasTarasonis_website.pdf (application/pdf)

Related works:
Journal Article: Income Inequality and Redistribution in Lithuania: The Role of Policy, Labor Market, Income, and Demographics (2022) Downloads
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