Maria Piotrowska, Ph.D., Katedra Ekonomii Matematycznej, Akademia Ekonomiczna, Wroclaw, ul. Komandorska 118/120, Wroclaw, 53-345, Poland
The main aim of the research is to examine the contributions of separate income sources to total income inequality in three Central European Countries: the Czech Republic, Hungary and Poland.
The following hypotheses are tested:
1. Increased wage differentials have been an important determinant of increasing inequality but over time the gap between private and state sector wages should narrow, resulting in a decline in the importance of this factor.
2. Incomes from self-employment and entrepreneurial activity in a private sector have introduced more inequality.
3. Capital incomes have contributed substantially to the growth in inequality.
4. Possibilities to profit from open borders and second job have caused earnings dispersion.
5. Farmer incomes and pensions have contributed weakly to changes in total inequality.
6. Taxes have been progressive; i.e. they have reduced income inequality.
The decomposition rule is based on the approach developed by Lerman and Yitzhaki (1985, 1994). The income elasticity is applied for analysing the impact of marginal changes in income components on income inequality measured by the extended Gini coefficient. The empirical results are calculated on the basis of Luxembourg Income Study (LIS) micro data.
Keywords: inequality, decomposition, income source.