INCOME INEQUALITY: MAJOR TRENDS AND FORMS

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 INCOME INEQUALITY: MAJOR TRENDS AND FORMS

Journal Title: Проблеми і перспективи розвитку підприємництва - Year 2014, Vol 1, Issue 6

Abstract

This article investigates income inequality among the population of transition economy countries. Studying different theoretical views on the problem of inequality and its relation to economic efficiency, it should be mentioned that there is no definite answer to the question of their interrelation. The pioneering research on interrelation between economic growth and income inequality was done by the outstanding economist S. Kuznets who established statistical correlation of the abovementioned categories based on the data from various countries at different stages of development. Modern theories describing interrelation between income inequality and economic growth utilize a number of factors (loan market imperfection, difference in savings rates, staff encouragement, etc.) to explain positive or negative impact of inequality on economic efficiency. One of the answers to the question of how inequality affects economic efficiency is its subdivision into productive and nonproductive (excessive). Productive inequality is unequal distribution of economic resources and cash flows among the population that is characterized by economic factors driven by objective market mechanisms. The impact of productive inequality on the efficiency of economic development is positive, stimulating productive competition and economic activity of the population and creating conditions for development and upgrading of skills and abilities. Nonproductive inequality is unequal distribution of monetary and material goods among the population driven by such factors as bureaucracy, illegal privatization and looting of national wealth. Nonproductive inequality hampers economic development, aggravating polarization and stratification, discouraging the population from effective professional activity and causing depressive sentiment that may bring people to the cycle of poverty. Based on the above, it is important to decrease the level of nonproductive inequality, which preconditions state intervention aiming to compensate for shortcomings of the market system, decreasing social and economic inequality. Ensuring the right of every person for certain standards and minimum guarantees and controlling income by its redistribution are the main functions of the state as a subject of social and market economy.  

Authors and Affiliations

S. Tyutyunnikova, O. Kulish

Keywords

income inequality productive inequality nonproductive inequality excessive inequality economic growth transition economy

EP ID EP105171
DOI -
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