Changes in Estonian Income Distribution: A Demographic Analysis

As noted by a variety of theoretical and empirical papers, the transition of the former Soviet socialist countries has brought with it changes in income distribution. As opposed to viewing income distribution overall, this paper examines changes in the level and the distribution of total income per equivalent adult in Estonia based on the head of household’s gender, nationality, education and age. We also use multivariate regression to determine the responsiveness of total household income to demographic, family and work characteristics in two time periods, 1995 and 1999. Our findings show that the pattern of income distribution does vary substantially between demographic groups and our findings are very consistent with the theoretical reasons for changes in income distribution during economic transition. In particular, we find sizable changes in the distribution of income within female headed-households and in the influence of ethnicity on income level and distribution. Understanding the systematic changes in income distribution and level allows policy makers to consider the effectiveness of social policy and the need for reform in the future.