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Transition Report 2013 Stuck in transition?

CH5 180sq

Facts at a glance

OVER 35% of variation in wealth in some transition countries is explained by circumstances at birth.

GENDER GAPS are greatest in the areas of employment, firm ownership and management across most countries observed.

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PLACE OF BIRTH is the main driver of inequality with regard to wealth.

PARENTAL EDUCATION is the main driver of inequality of opportunity with regard to tertiary education.

RIGID LABOUR MARKET STRUCTURES and weak education systems restrict opportunities for young people.


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Economic inclusion

Conclusion

This chapter has assessed inequality of opportunity in the transition region using two complementary approaches. First, “bottom-up” econometric analysis established the extent to which differences in household assets and tertiary education within countries can be attributed to different circumstances at birth, such as parental education and place of birth. Second, a combination of policy indices and data on outcomes was used to assess the capacity of the economic system in each country to create opportunities regardless of gender and place of birth and to equip young people with skills and jobs regardless of their social background (“top-down” analysis).

The analysis has significant limitations, due mostly to gaps in the data. Inequality of opportunity was assessed with respect to household assets, rather than income or earnings. A number of potential determinants of inequality of opportunity – including ethnicity, sexual orientation and physical disability – were not considered. The bottom-up analysis of gender is incomplete, focusing only on its effect on tertiary education. In addition, the SEMED countries were covered only in the top-down analysis (primarily for gender and youth-related gaps). Subject to these caveats, several conclusions emerge.

First, according to the bottom-up analysis, there is significant inequality of opportunity with regard to economic success – proxied by household assets – in a number of transition countries. The drivers of these are place of birth (with birth in rural areas putting individuals at a disadvantage) and parental education. Inequality of opportunity with regard to these circumstances is particularly high in the Western Balkans and some eastern European and Central Asian countries.

Second, according to the top-down analysis, the same group of countries also tend to have less inclusive institutions and economic systems. High inequality of opportunity in these countries could be due to regional variation in the quality of local institutions, employment opportunities and public services. It could also reflect a failure to provide young people with relevant education and job opportunities, which implies that disadvantages at birth persist in later life. Similar inclusion gaps, particularly in relation to youth, seem to be present in the SEMED countries (which are not included in the bottom-up analysis).

Third, an analysis of labour policies and practices, education, access to finance and related aspects of the economic system suggests that “large” inclusion gaps with regard to gender exist in most Central Asian and SEMED countries, and also in Turkey. In addition, there are “large” gender gaps in specific dimensions – particularly labour practices, and female participation in  management and business ownership – in virtually all transition countries.

Lastly, with the exception of Egypt, Morocco, Tajikistan, Turkey and Uzbekistan, education is not a major factor in the inequality of opportunity suffered by women. At the same time, in most countries gender does not seem to play a role in explaining differences in tertiary education. That said, the analysis also confirms the existence of “large” gaps in terms of the quality and relevance of education in many transition countries. The SEMED region also has “large” gaps in relation to the typical length of education. Therefore, education – and particularly its quality – is likely to be an important factor contributing to inequality of opportunity as regards people’s social or geographical origins.

The analysis in this chapter raises warning flags about the presence of inclusion gaps and household-level inequality of opportunity in some of the countries that are in greatest need of continued market-oriented reform. It also points to the aspects of the economic system that appear to be the most problematic in those countries. However, this is only a first step. Additional analysis will be needed to explore how reform and economic performance are influenced by country-level inclusion gaps and household-level inequality of opportunity as identified in this chapter. Key to this will be a better understanding of how actual inequality, inequality of opportunity and the inclusiveness of economic systems influence beliefs about markets and democracy in the transition region.

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