After the Russian financial crisis of 1998 issues such as the sustainability of economic growth, economic inequality and poverty have become points of contention both in Russia and in the world. The main purpose of this paper is to investigate economic disparity and inequality and their influence over market transition in Russia, and to consider how people behave under conditions of economic inequality.
First of all, globalisation and the market transition in Russia has brought about increased international disparity. As a result of the investment gap, the real disparity in economic power is greater than it seems. At the same time, domestic economic disparities in Russia have expanded during market transition. There is a striking contrast among industries. There are growing sectors like exports, resources and energy, average sectors and stagnating sectors such as light industry and machine assembly. Equipment age structure and investment capacity also gives an account of industrial disparities. In addition, regional differentiation is striking with Russia's economy often referred to as “one metropolis capitalism”. We can observe an increase in regional disparities in unemployment rate and in the share of loss-making enterprises, which suggest different levels of adaptability to the market.
Is Russia egalitarian in relation to income and assets? Considering the Gini coef-ficient, inequality increased in Russia during the transition process. It is important to appreciate that changes in inequality were very large and occurred during the early years of transition. Income and expenditure of households indicate such changes. Revenue from business activities and property income are increasing, while wage differentials have maintained their influence. Among expenditures, the share of savings is increasing. Consumption differentiation can be observed among non-basic goods like consumer durables. These phenomena suggest the existence of a segmented market. The redistribution effects of social transfer, however, have been preserved and we cannot neglect them under the flat income tax system. Thus, empirical evidence suggests heightened inequality and social stratification has accompanied government failure.
However, the population of Russia has not always reacted destructively regarding inequality and poverty. The nature of industrial disputes also suggests weak resistance and low levels of dissatisfaction. First, economic inequality has led to the exit of losers who have sought additional revenue in the informal sector. Second, families have enlarged their economic activity, which compensates for income shortages. Third, there is a gray area between the official labour market and unemployment. According to the new investigation, the informal employment includes more than 15% workers. Fourth, elasticity of wages is strong and stimulates the second job. Finally, Russian enterprises have kept their social function in the transition period. The above re-sponses are based on the legacy of the former system and they have the twofold effect of both easing and intensifying inequality. Economic inequality and the specific reactions to it to a large extent reflect the peculiarities of the Russian market.
