Bank of Lithuania

No 14. Nerijus Černiauskas, Andrius Čiginas. Measurement and decomposition of Lithuania’s income inequality


Despite Lithuania’s household income inequality being among the highest in the European Union (EU), little empirical work has been carried out to explain such disparities. In this article, we use the EU Statistics on Income and Living Conditions sample micro data. We confirm that income inequality in Lithuania is high compared to the EU average and find that it is robust to inequality measure or equivalence scale used. We have also decomposed household disposable income inequality by subgroups and factors. We find that the number of employed household members in Lithuania’s households affects income inequality more as compared to the EU. It is related to a larger labour income, and self-employment income in particular, contribution to inequality in Lithuania as opposed to the EU. Moreover, transfers and taxes have a smaller impact on reducing inequality in Lithuania than in the EU.

JEL Codes: D31.

The views expressed are those of the author(s) and do not necessarily represent those of the Bank of Lithuania.

European Union, Lithuania, income inequality, Nerijus Černiauskas, Andrius Čiginas, factor decomposition, subgroup decomposition