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

ENWe 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. [From the publication]

• Factors behind the changes in income distribution in the Baltics: income, policy, demography / Jekaterina Navickė. Journal of Baltic studies. 2020, vol. 51, no. 2, p. 137-157.
• Measurement and decomposition of Lithuania's income inequality / Nerijus Černiauskas, Andrius Čiginas. Baltic journal of economics. 2020, Vol. 20, no. 2, p. 139-169.