Income inequality and redistribution in Lithuania: the role of policy, labour market, income and demographics

Nerijus Černiauskas, Denisa Sologon, Cathal O’Donoghue, Linas Tarasonis

Research output: Contribution to journalArticlepeer-review


We model the household disposable income distribution in Lithuania and explore the drivers of the increase in income inequality between 2007 and 2015. We quantify the contributions of four factors to changes in the disposable income distribution: (i) demographics; (ii) labour market structure; (iii) returns and prices; and (iv) tax-benefit system. Results show that the effects of the factors were substantial and reflected heterogeneous developments over two
sub-periods: changes in the tax and benefit system cushioned a rapid rise in market income inequality due to the global financial crisis during 2007-2011, but failed to do so during the subsequent years of economic expansion, when rising returns in the labour and capital markets significantly increased disposable income inequality. We also find that declining marriage rates
contributed to the increase in income inequality in Lithuania.
Original languageEnglish
Pages (from-to)S131-S166
JournalReview of Income and Wealth
Issue numberS1
Early online date2 Nov 2021
Publication statusPublished - 2022

Bibliographical note

Funding Information:
: This research is part of the follow‐up of theSimDeco project () supported by the National Research Fund, Luxembourg (grant C13/SC/5937475). The authors are indebted to the many people who have contributed to the development of EUROMOD, which is maintained, developed, and managed by the ISER at the University of Essex, in collaboration with national teams from the EU member states. The results and their interpretation are the authors’ responsibility. The views expressed in this paper are those of the authors and do not necessarily represent those of the Bank of Lithuania or the Eurosystem. Note Tax‐benefit systems, employment structures, and cross‐country differences in income inequality in Europe: a micro‐simulation approach

Publisher Copyright:
© 2021 International Association for Research in Income and Wealth


  • income inequality
  • redistribution
  • tax-benefit policies
  • decompositions
  • microsimulation

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