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This paper investigates the main determinants of income inequality in transition countries during the period 1990–2018. To this end, we address a major methodological challenge that lies at the core of the cross-country literature on income inequality: the potential endogeneity of income growth, which is largely ignored by most empirical studies. We adopt a two-pronged empirical strategy by (i) using trading partners’ weighted average real GDP as an instrumental variable (IV), and (ii) estimating the model via the two-stage least squares (2SLS) approach for static models and the Generalized Method of Moments (GMM) estimator for dynamic models. Our empirical findings are consistent with the Kuznets curve that illustrates a nonlinear relationship between income inequality and the level of economic development. We also find that the redistributive impact of fiscal policy is statistically insignificant and taxation and government spending appear to have the opposing effects on income inequality in transition economies.

Macroeconomics --- Public Finance --- Personal Income, Wealth, and Their Distributions --- Equity, Justice, Inequality, and Other Normative Criteria and Measurement --- Macroeconomic Analyses of Economic Development --- Economic Development: Human Resources --- Human Development --- Income Distribution --- Migration --- Aggregate Factor Income Distribution --- Fiscal Policy --- National Government Expenditures and Related Policies: General --- Public finance & taxation --- Income inequality --- Income distribution --- Personal income --- Fiscal policy --- Expenditure --- National accounts --- Income --- Expenditures, Public --- Russian Federation

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This paper investigates the main determinants of income inequality in transition countries during the period 1990–2018. To this end, we address a major methodological challenge that lies at the core of the cross-country literature on income inequality: the potential endogeneity of income growth, which is largely ignored by most empirical studies. We adopt a two-pronged empirical strategy by (i) using trading partners’ weighted average real GDP as an instrumental variable (IV), and (ii) estimating the model via the two-stage least squares (2SLS) approach for static models and the Generalized Method of Moments (GMM) estimator for dynamic models. Our empirical findings are consistent with the Kuznets curve that illustrates a nonlinear relationship between income inequality and the level of economic development. We also find that the redistributive impact of fiscal policy is statistically insignificant and taxation and government spending appear to have the opposing effects on income inequality in transition economies.

Russian Federation --- Macroeconomics --- Public Finance --- Personal Income, Wealth, and Their Distributions --- Equity, Justice, Inequality, and Other Normative Criteria and Measurement --- Macroeconomic Analyses of Economic Development --- Economic Development: Human Resources --- Human Development --- Income Distribution --- Migration --- Aggregate Factor Income Distribution --- Fiscal Policy --- National Government Expenditures and Related Policies: General --- Public finance & taxation --- Income inequality --- Income distribution --- Personal income --- Fiscal policy --- Expenditure --- National accounts --- Income --- Expenditures, Public

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Remitances are an important source of external financing in low- and middle-income countries. This paper uses the gravity model to analyze remittance flows in Russia and Caucasus and Central Asia (CCA) countries. Standard gravity determinants, such as GDP in sending and recieiving countries, bilateral distance, existence of common borders and common official language, fit remittance flows well. Remittances also react to inflation and exchange rate movements in recipient countries to sustain their purchasing power. In line with the altruism hypothesis, remittances flow to countries with higher age dependency ratio. Remittances are countercyclical and help stabilize outputs in recipient countries. However, global shocks resulting in sharp output losses of sending countries would lead to large volatility and decline of remittance inflows in recipient countries. The results of the analysis can be used to assess the impact of the COVID-19 shock on projected remittance flows into CCA.

Econometrics --- Exports and Imports --- Foreign Exchange --- Macroeconomics --- Emigration and Immigration --- Remittances --- Economic Development: Human Resources --- Human Development --- Income Distribution --- Migration --- Geographic Labor Mobility --- Immigrant Workers --- Econometric Modeling: General --- Energy: Demand and Supply --- Prices --- International Migration --- International economics --- Econometrics & economic statistics --- Currency --- Foreign exchange --- Migration, immigration & emigration --- Gravity models --- Oil prices --- Exchange rates --- Outward remittances --- Balance of payments --- Econometric analysis --- Population and demographics --- International finance --- Econometric models --- Emigrant remittances --- Emigration and immigration --- Russian Federation

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Absolute poverty has dropped markedly in Bulgaria but income inequality has increased substantially in the aftermath of the GFC. This increase is due to a rise in market income inequality that was compounded by a reduction in fiscal redistribution. The redistributive role of direct taxation has declined with the introduction of a flat tax and social spending is relatively low and decreasing (as a share of GDP), is concentrated on a few social risks, and experienced a decline in its redistributive efficiency. The COVID-19 crisis is likely to deepen income inequality, increasing the room for redistributive policies.

Macroeconomics --- Poverty and Homelessness --- Equity, Justice, Inequality, and Other Normative Criteria and Measurement --- Taxation and Subsidies: Externalities --- Redistributive Effects --- Environmental Taxes and Subsidies --- National Government Expenditures and Welfare Programs --- Measurement and Analysis of Poverty --- Government Policy --- Provision and Effects of Welfare Program --- Economic Development: Human Resources --- Human Development --- Income Distribution --- Migration --- Aggregate Factor Income Distribution --- Welfare, Well-Being, and Poverty: General --- Poverty & precarity --- Income inequality --- Income --- Poverty --- Income distribution --- Fiscal redistribution --- National accounts --- Bulgaria

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Remitances are an important source of external financing in low- and middle-income countries. This paper uses the gravity model to analyze remittance flows in Russia and Caucasus and Central Asia (CCA) countries. Standard gravity determinants, such as GDP in sending and recieiving countries, bilateral distance, existence of common borders and common official language, fit remittance flows well. Remittances also react to inflation and exchange rate movements in recipient countries to sustain their purchasing power. In line with the altruism hypothesis, remittances flow to countries with higher age dependency ratio. Remittances are countercyclical and help stabilize outputs in recipient countries. However, global shocks resulting in sharp output losses of sending countries would lead to large volatility and decline of remittance inflows in recipient countries. The results of the analysis can be used to assess the impact of the COVID-19 shock on projected remittance flows into CCA.

Russian Federation --- Econometrics --- Exports and Imports --- Foreign Exchange --- Macroeconomics --- Emigration and Immigration --- Remittances --- Economic Development: Human Resources --- Human Development --- Income Distribution --- Migration --- Geographic Labor Mobility --- Immigrant Workers --- Econometric Modeling: General --- Energy: Demand and Supply --- Prices --- International Migration --- International economics --- Econometrics & economic statistics --- Currency --- Foreign exchange --- Migration, immigration & emigration --- Gravity models --- Oil prices --- Exchange rates --- Outward remittances --- Balance of payments --- Econometric analysis --- Population and demographics --- International finance --- Econometric models --- Emigrant remittances --- Emigration and immigration