Income inequality and its driving forces in transitional countries: evidence from Armenia, Azerbaijan and Georgia

Abstract

The purpose of this study is to measure and compare income inequality and its driving forces in the low-income countries of the Caucasus by drawing on micro-data from nationally representative household surveys in Armenia, Georgia, and Azerbaijan. Inequality in the region of the Caucasus is very high. The Gini coefficient for the regions as a whole reached 55%. Azerbaijan has the lowest income inequality, followed by Armenia and Georgia. Among predictors, graduate and postgraduate education has the strongest positive effect on income in all countries. By contrast, the positive effect of technical vocational education is relatively smaller and can be observed only in Azerbaijan and Georgia. In addition to formal education, knowledge of English and computers also has a separate positive effect in all countries. An increase in age, and therefore an increase in years of experience, has a low positive impact on the increase in income in all countries. By contrast, being a female has the strongest negative effect on income across the region. Living in rural areas and reporting poor health is associated with having lower income.