New paper on the long-run evolution of top income inequality in Croatia and Slovenia

This new paper by Filip Novokmet and Nataša Kump presents findings on the long-run dynamics of income inequality in Croatia and Slovenia.

The transition to the market economy in these two countries has led to a moderate increase in income inequality. Inequality increased in the 1990s and stabilized afterwards, with the increase in inequality being mainly driven by the rising shares of top income groups. At the turn of the 20th century, top 1% were receiving about 15% of total income, a share that fell drastically to just above 5% in the 1960s. The transition of the 1990s, however, did not go with a very strong rise of inequality at the top. Today, the top 1% income share in Croatia and Slovenia is remarkably low compared to countries like Germany, France or the UK, reaching only about 7 and 8% respectively.

This development can be explained by the ‘gradualist’ transition course. In both Slovenia and Croatia, the slow privatization and the large public sector have contributed to the emergence of labour market institutions that procured a social equilibrium with low inequality. Furthermore, the substantial importance of the state ownership of the corporate sector in Slovenia and the foreign and state ownership in Croatia has made the concentration of private capital income less pronounced at the top of the income distribution. New inequality series for Croatia and Slovenia are a valuable contribution in assessing the role and showing the importance of policies and institutions in shaping inequality.

The long-run evolution of the top 1% income shares in Slovenia and Croatia