Inequality, Growth and Public Spending in Central, East and Southeast Europe


Mario Holzner

wiiw Balkan Observatory Working Paper No. 87, October 2010

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The article analyses the joint determinants of inequality and growth with a special emphasis on public spending structures in transition. The mutual benefit of low real interest rates, to both equity and economic development is a major result of this paper. In terms of public spending items we find a positive correlation with equity and a negative with growth as several of the government expenditure items seem to act counter-cyclically. In the late 1990’s and early 2000’s the European integration process allowed most of the transition economies to aim for the best of both worlds: equity and economic development.


Keywords: inequality, government expenditures, economic growth, transition

JEL classification: D63, H5, O4, P2

Countries covered: CIS, SEE, Visegrad countries

Research Areas: Macroeconomic Analysis and Policy, Labour, Migration and Income Distribution