Income Inequality and Mobility in Hungary, 1992-96 [antikvár]

Executive SummaryThe first half of the 1990s brought major changes to Hungary. The positive sides of the transformation in the Hungarian economy and society were accompanied by less welcome aspects - a sharp fall in GDP, double-digit unemployment and falling real incomes. How have children fared in these circumstances? This paper considers the changing position of children in the Hungarian income distribution, comparing it to that of the elderly - another potentially vulnerable group whose incomes, like those of households with children, are a concern for policymakers.The data used are drawn from the Hungarian Household Panel Survey (HPS) for the years 1992-96, a survey of about 2,000 households. (These years saw a modest rise in income inequality recorded in the HPS, but a sharp fall in real incomes.) As a panel survey, this source allows the same individuals and households to be followed from one year to the next. The paper exploits this feature of the data by looking at income mobility. How much do households' incomes change from year to year? One aspect of this question is the persistence of poverty. Are the households at the bottom of the income distribution always the same ones or is poverty a transient phenomenon with much movement in and out of low incomes? Again, in looking at this issue the paper contrasts children and the elderly.The position of children (defined as persons aged 0-16) in the income distribution relative to that of the elderly (persons over pension age) has worsened markedly. (Results refer to the per capita distribution of annual incomes.) In 1992, 54 percent of children were found in the bottom four deciles of the income distribution, but by 1996 the figure had risen to 63 percent. By contrast, the proportion of elderly in this part of the income distribution fell over the period from 37 percent to 22 percent. (Taking the bottom two deciles, the figure for children went up from 32 percent to 38 percent, while that of the elderly fell from 15 percent to 7 percent.) The relative position of children to that of the elderly has clearly worsened sharply.The data show that there is a considerable degree of income mobility from one year to the next. (One implicadon of this is that the inequality of households' incomes aggregated over the five years covered by the survey is less than that in any individual year.) For example, more than half the population