Maria Piotrowska, Ph.D., Katedra Ekonomii Matematycznej, Akademia Ekonomiczna, Wroclaw, ul. Komandorska 118/120, Wroclaw, 53-345, Poland
The purpose of this paper is to investigate the channels through the globalization process influence income inequality and poverty in Central and Eastern European Countries (CEECs). The research addresses the following questions: 1) Could globalization process be a significant factor that has contributed to the changes in income inequality and poverty in CEECs; 2) If yes, how has globalization affected income inequality and poverty? What mechanisms have been important? Effects on the welfare state or changes in the employment structures?; finally 3) Has the interaction between globalization and inflation existed, if yes, how has the reduction in inflation affected income inequality and poverty? These hypotheses are tested with data on 10 CEECs (Bulgaria, Czech, Estonia, Latvia, Lithuania, Hungary, Poland, Slovakia, Slovenia, Romania) for the 2000-2006 period. The dependents variable are the Gini coefficient, a measure of income inequality and at-risk-of-poverty rate before social transfers. Eurostat is a primary data source. Globalization is measured as the FDI intensity as well as economic openness (imports and exports as a percentage of GDP). The econometric models include control variables for economic development, national welfare spending and the employment structure. The data form an unbalanced panel, with countries contributing different numbers of observations, depending on the data availability. This problem suggests to estimate random-effects regressions and/or fixed-effects regressions. The small size of the sample results in an insufficient degrees of freedom necessary to estimate coefficients for all the control variables. The solution is to estimate the baseline model and to add each of the other controls sequentially, finally estimate a model with a full complement of controls.
Keywords: Globalization, income inequality, poverty, economic development, welfare state, employment structure.