Work detail

Determinants of income inequality in post-communist Central and Eastern European countries: Role of corruption

Author: Mgr. Khrystyna Samanchuk
Year: 2016 - summer
Leaders: Mgr. Eva Hromádková
Consultants:
Work type: Finance, Financial Markets and Banking
Masters
Language: English
Pages: 76
Awards and prizes:
Link: https://is.cuni.cz/webapps/zzp/detail/166144/
Abstract: The main purpose of this thesis is to investigate the effect of corruption on income inequality
(that could serve as indicator of the welfare of whole society). Since post-communist
countries of Central and Eastern Europe had issues with providing effective policies for
adapting to the market economy, we want to discover main drivers of this situation. We
examined previous researches that suggest both positive and negative correlation between
corruption level and income inequality. Main obstacle of the research is inherent
heterogeneity present across countries. Our analysis was performed on two datasets: 11 postcommunist
countries CEE and additional 17 European Union countries. We implemented
different estimation methods and discovered that panel Vector autoregressive model is the
best choice. Within the panel structure we tackled individual heterogeneity by estimating
fixed effects and clustering on the country level, implemented dynamic relationship in the
dependent variable and solved endogeneity problem by using instrumental variable. We found
that corruption has positive relationship with income inequality. Furthermore, other important
drivers are: social spending, education level and unemployment. As a result, we suggested the
ways to decrease corruption on the appropriate example of Georgia that reached success in
anti-corruption campaign.
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