**Changes in urban poverty over time.** Several of the ECA countries, such as Armenia, Georgia and Moldova,<sup>21</sup> showed a sharp deterioration in urban poverty (also relative to rural poverty) around the time of the Russia macroeconomic crisis in the late 1990s, but the situation has improved somewhat since then. In Russia itself the urban population was affected by the crisis more harshly than the rural population.<sup>22</sup> This pattern reflects that urban economies are highly sensitive to macroeconomic fluctuations, which can ripple throughout the services sectors and public employment and therefore have a wide reach in cities. Price inflation in food and utilities, and fiscal retrenchment, the latter seen in wage arrears by public sector employers, also hit urban residents particularly hard.  At the same time, urban areas characterized by economic diversity can recover faster when general conditions improve.  This is the major reason why the capital cities, which offer more economic diversity than the secondary cities, have fared better in most countries.

# **4.1.2. Inequality by settlement area**

As is usually the case, income inequality as measured by the ratio of the richest quintile (Q5) to the poorest (Q1) within each settlement area is higher in urban areas than in rural, in all but six of the 20 countries for which these data can be obtained (the exceptions being Lithuania, Poland, Bosnia, Bulgaria, Serbia, and Kyrgyz Republic). (Table 4.2) The highest inequality might be expected to be found within the capital city because it is typically the center of the greatest wealth, but this is the case only for eight of the sampled countries.<sup>23</sup> Secondary cities are the most unequal in five countries: Hungary, Romania, Azerbaijan, Kazakhstan and Turkmenistan, although generally only by a slim margin.

Gini coefficients, which measure the distribution of income across all the quintiles, are highest (indicating greatest inequality) in urban areas for fourteen of the twenty countries and are the same as those in rural areas in a fifteenth, Bosnia. Countries with high urban Ginis are divided about equally between those with the highest Ginis in capital cities and those where the highest Ginis are to be found in other urban areas.

The countries generally do not show stark disparities in the measures of inequality across their settlement groups, but there are some notable exceptions. While the Gini coefficients (based on per capita consumption) within the three settlement groups hover in the range of 0.25-0.35 for most countries, the capital cities and/or other urban areas in Moldova, Azerbaijan, Georgia, Tajikistan, Turkmenistan and Russia score much higher ranging from 0.36 to 0.47. Rural areas are more equal and only Turkmenistan (0.36) and Russia (0.40) are above 0.35.

Additional evidence on non-income inequalities within settlement areas will be discussed below in section 4.2.

> 21 _Armenia Poverty Assessment 2003, Table 11.B.1, p. 7.;  Georgia Poverty Assessment 2002.; Poverty in Moldova (1997-2002).  Poverty Assessment Concept Note, 2003._

> 22 _Lokshin, Michael and Martin Ravaillion 2000 (background paper to Transition study)_

> 23 _Albania, Moldova, Georgia, Armenia, Tajikistan, Uzbekistan, Belarus and Russia._

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