RUSSIAN DOLL OF SUSTAINABILITY: FACTOR ENDOWMENTS, DEMOCRATIC POLITICAL EQUALITY AND INCOME INEQUALITY IN THE POST-COMMUNIST CENTRAL AND EASTERN EUROPEAN COUNTRIES

Abstract

The Russian doll of sustainability framework is applied to find income inequality determinants in transition countries. Land endowment effects on institutions and economic outcomes are analyzed using the autoregressive distributed lag approach on ten Central and Eastern European countries (CEE) from 1995 to 2021. Findings suggest land endowment has an income inequality-widening effect, and trade openness reduces inequalities. However, various democratic measures affect inequality differently, depending on the time horizon. For example, while participatory democracy (PARTID) increases inequality, egalitarian democracy (EGALD) decreases it, but a more rural-biased public service provision is associated with higher inequality in the short run and decreased inequality in the long run. Lastly, we do not confirm a robust Kuznets curve over the development path, and we do not find financial development statistically significant in explaining income inequality.