Income inequality in Latvia, as measured by the Gini coefficient, is very high by EU standards (though not as high as in e.g. the US) so I found it very refreshing that debate around this topic was a quite hot issue at the end of 2012, not least inspired by this article.
The EU Commission is not too happy about recent Latvian policy in this area – here is an excerpt from p. 10 of its recent EU BoP [Balance of Payments] Assistance to Latvia – Second Review under Post-Programme Surveillance (my italics):
As regards reforms of the social assistance system, the government has decided to decentralise the financing of the Guaranteed Minimum Income benefit (GMI) and to lower its minimum amount. These steps go against the relevant CSR [Country Specific Recommendations] and SMoU [Supplementary Memorandum of Understanding] conditionality. The decisions were made without consulting the Commission, as stipulated in the SMoU. There was no substantial prior analysis of the impact on poverty and incentives to work, even though one relevant analysis is in the pipeline (the World Bank study Latvia: Who is Unemployed, Inactive or Needy?; results to be ready by early 2013).
Ouch! Enough said! But what about crisis and income inequality – is there a link between economic development during the crisis and income inequality? Below will follow two very simple plots trying to depict this. In both cases I have the change in Gini from 2007 (before the crisis) to 2011 (most recent data available). Points to the right thus explain higher inequality over that period. On the second axis I have the change in the unemployment rate and the change in GDP, respectively. A country like Latvia, where unemployment rose rapidly and GDP declined substantially will be high up in the first graph and far down on the second.
Inequality actually dropped a tad in Latvia over the period 2007 – 2011 as it also did in Estonia and Lithuania (the three countries are marked with a black dot (Estonia), red dot (Latvia) and a green dot (Lithuania). Otherwise the charts are a display of complete randomness: For instance, inequality increased a lot in France and declined substantially in Romania although the two countries have seen about the same change in unemployment and GDP.
Conclusions? A very tentative conclusion could be that the impact from GDP and/or unemployment on inequality is very country-specific. In other words, if Latvia should want to reduce inequality it will require policy changes, not “just” changes in economic activity and employment that somehow will trickle down.
Latvia may not be interested in reducing income inequality and there is nothing odious about that – lower inequality does not necessarily correlate with higher GDP, again witness the US – but the powers that be could at least have waited for the World Bank study before they made their decisions, couldn’t they?
Figure 1: Change in Gini coefficient (1st axis) against change in unemployment rate (2nd axis), 2007 – 2011, EU27
Source: Eurostat and own calculations
Figure 2: Change in Gini coefficient (1st axis) against growth in GDP (2nd axis), 2007 – 2011, EU27
Source: Eurostat and own calculations
This little piece was inspired by this paper, from Bruegel, which only looks at the Eurozone countries.
Morten Hansen is Head of Economics Department at Stockholm School of Economics in Riga.
Komentāri (12)
Mārtiņš 23.01.2013. 20.16
If the GINI does not correlate with the GDP, then it makes even less sense to perpetuate the high inequality in Latvia as it simply means that a large part of the population is destined to suffer unnecessarily.
I disagree that Latvians have consciously chosen to suffer. Rather it is a democratic inexperience and lack of understanding about many important policy issues.
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Ieva 22.01.2013. 14.29
Pievienojos Hansena domai – Gini indekss ir specifisks valstij, ne ekonomikas stāvoklim, bagātībai, bezdarbam vai kādiem citiem faktoriem.
Vācijai, Baltkrievijai piemēram tas ir zemāks kā mums, Amerikai, Krievijai, Ķīnai augstāks, Anglijai samērā līdzīgs… Piekrītiet,korelācija te neveidojas..
Un tāpēc nevajag tā nozīmi pārvērtēt- pie “laba” GINI indeksa, piemēram, visiem ienākumi ir apmēram vienādi- bet tad pabalstu saņēmēja un čakla censoņa ienākumi ir aptuveni līdzīgi, jeb – kāpēc tad strādāt? Vai otrādi, ja šķēres ir lielas, ir iespējamas divas situācijas – ir sociālo kastu sistēma, cilvēks nevar izrauties no piedzimstot iegūtās lomas, vai arī otra- pastāvot tā sauktai mobilitātei- mazāk pelnošam sabiedrības slānim ir iespējai ar savu čaklumu, darbu un zināšanām kļūt par pārtikušās sabiedrības daļu. Šķēres rada stimulu censties, un ja ir zināms ceļš, pa kuru ar šo centību iet, tad tieši tas būs viens no valsts progresa virzītājiem.
Un te nu varam spekulēt, vai Zviedrija ir “labāka” ar savu zemo GINI indeksu, salīdzinot, piemēram, ar ASV ar tās augsto GINI rādītāju. ASV vidējais iedzīvotājam iedzīvotājam ienākumi ir vairāk, tātad pilsoņi ir bagātāki, bet vai tas ir labāk kā Zviedrijā? Vai Baltkrievija, kura arī ir “laba” GINI indeksa nozīmē, ir “labāka” par Latviju, kurai tas ir augstāks?
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efeja60 > Ieva 22.01.2013. 19.56
Ušakovs kopā ar Dombrovski un Pavļutu ir vainīgi pie Rīgas siltuma tarifiem.
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ineta_rr > Ieva 22.01.2013. 14.45
Ir daudz vienkāršāk – kur tu vēlētos dzīvot/būt piedzimis – “iespēju zemēs” Krievijā un Ķīnā, kur tevi šķēres “stimulē” censties vai tomēr vismaz Anglijā, Latvijā? Zviedrija ir faktiski vistuvāk komunismam no visām valstīm, bet Baltkrievija ir reāls izlēcējs, kur ir zems Gini koeficients, bet nav demokrātijas. Līdzīgi ASV vismaz ir demokrātija.
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janis17 > Ieva 22.01.2013. 16.43
S&M Baltkrievujas izstāde ir kas līdzīgs vdnh, ar realitāti tam maz sakara, tiklīdz runā par sadarbības iespējām, tā pļurkt vien sanāk…
Kāpēc tad visa pasaule nebrauc ar belarusiem un nestaigā baltkrievu kurpēs?
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Andris > Ieva 22.01.2013. 17.16
S&M. Es ņēmu datus no CIA World Factbook. Tur ir rakstīts, ka BLR 2011. gadā eksportēja par 41 mlrd. USD, bet Latvija par 12 mlrd. (Tagad mums būtu jau tuvu 14 mlrd., jo pagājušajā gadā eksportam bija pieaugums 15%). Iznāk, ka Latvijas rādītāji ir daudz labāki, ņemot vērā iedzīvotāju skaitu attiecību.
Kopprodukta absolūtā vērtība mums ir vēl daudz labāka (tikai 1:2 no BLR) (27 mlrd. pret 54). Pēc pirktspējas paritātes esam 1:4.
Pats BLR neesmu bijis, bet viņi savā internetā spriež, ka gan pārtika, gan drēbes lētāk pirks Polija un Lietuvā, un regulāri turp brauc. Pērk, piemēram, Polijā jēlu cūkgaļu un slepj to zem krekla, pārbraucot robežu.
Par to ka apkure viņiem ir ļoti lēta, un arī ūdens, arī esmu lasījis. Tā tas ir. Interesanti cik ilgi tas vēl noturēsies. Tas taču beigu beigās izmaksā šausmīgi dārgi, jo cilvēki nav motivēti taupīt enerģiju.
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Andris > Ieva 22.01.2013. 16.32
Jā, BLR ir visai īpatnēja valsts. Tur bezdarbs 0,5%, kaut kas pavisam nereāls. Tas panākts ar to, ka cilvēki nāk uz darbu un ražo nevienam nevajadzīgu produkciju, ar kuru tiek piepildītas noliktavas. Bieži lasu BLR internetu. Te, piemēram, paklāju aušanas fabrikā dažas darbinieces protestē pret to, ka viņam ir alga tikai 20 lati. Bet viņu kolēģes, kuram alga lielāka (tuvu 100) baidās viņas atbalstīt.
http://charter97.org/ru/news/2013/1/22/64258/
Neticu, ka šādā komunistiskā sistēma ir iespējama kaut kāda attīstība. Bezdarbs 0,5% mazina GINI, bet tajā pat laikā nozīmē, ka cilvēkiem nav motivācijas.
To S&M: Katrs Latvijas iedzīvotājs gan ražo, gan eksportē vairāk, nekā katrs Baltkrievijas iedzīvotājs. Tāpēc jākaunās būtu viņiem, nevis mums.
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Andžs > Ieva 22.01.2013. 14.43
Jā, Zviedrija šajā ziņā ir labāka, jo tur cilvēki nevar nosalt līdz nāvei tikai tāpēc, ka viņiem nav ko maksāt par apkuri. Acīmredzot, šajā ziņā arī Baltkrievija ir labāka. Taču nevajag jaukt sociālās vienlīdzības rādītājus ar ekonomisko vai runas brīvību. Tas, ka Baltkrievijā ir maza sociālā nevienlīdzība, neko nepasaka par citām šīs valsts īpatnībām, kas salīdzinājumā ar Latviju nemaz nav labas.
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Andžs 22.01.2013. 14.50
The real puzzle is that despite all the complaints Latvians seem to enjoy it this way. I mean, look at the way people vote! There have been attempts (at least in terms of declared objectives) to build political parties on the premise of more redistribution and social fairness. These have constantly failed simply because only a tiny minority of the electorate is ready to support such objectives. Possibly people perceive their net benefits at individual level from such policies as negative, whereas it is clear that for the country as a whole it would be pareto improving.
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@Andžs > Andžs 22.01.2013. 17.53
Where do you see the vast wealth of Belarus? Its GDP per capita is barely above 1/3 of that of Latvia! And yet it has more social equality than Latvia. This comment just illustrates my point. Latvians are not ready for this kind of politics. It’s not about redistributing vast amounts Marx style in the sense of taking from John and giving to Peter. It’s about some symmetry in the tax system, which is unfortunately lacking. Latvia has excessive taxation of wages in the form of social security contributions and insufficient taxation of other types of income and consumption of luxury items. You don’t need vast wealth to change the tax system – it’s a political choice, which requires electoral support. The latter is clearly lacking.
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lindapastare > Andžs 22.01.2013. 15.52
Don’t rush with using “it is clear” statements. The question is still valid: is the positive benefit of progressive taxes the cause or the effect of healthy and strong economics? I would say it is just an effect – therefore you cannot directly apply such politics to weak and/or undeveloped economics.
All “rich” countries have gone through their path of bussiness muscle-building process – the wild capitalism. Once they got rich enough they could start distributing wealth among those incapable of making their own fortunes. Is Latvia ready for such distribution? Where do you see the vast wealth that can be distributed?
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Dzintars > Andžs 23.01.2013. 15.44
Fully agree (with your first comment – that Latvians have chosen this).
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