inequality within this group accompanied, in many cases, by its rising share in total population. Growing inequality amongst the non-employed may be a reflection of the increasingly poor opportunities for those who are unemployed or out of the labor force to sustain their standard of living (relative to national mean per capita consumption) and can be related to the failure to raise the share of the employed in total population.

Beyond these generalizations, how different factors come together is very much a country-specific matter. In Russia, in particular, where overall inequality has somewhat receded during the period under review, the main factor is the shift from self-employment (whether entrepreneurial or subsistence) to wage employment between 1999 and 2002, accompanied by a decline in inequality among wage earners. One factor explaining this decline is the reduction in arrears which, as already discussed in Section IV, has been a feature of the economic recovery in the CIS, Overall inequality declined in Moldova as well. However, this is not due to changing shares of different groups, but a decline in within-group inequality for all major groups, viz. wage employees, entrepreneurs, and subsistence farmers. The reduction in wage inequality may be on account of arrears reduction. However, the reduction in inequality among agricultural self-employed and rural residents engaged in subsistence farming is a likely outcome of somewhat delayed, but equitable land reform. In contrast, in Poland and Romania upward pressure from non-workers has been reinforced by rising inequality among wage earners. This is no doubt related to the further decompression in wages in those countries (World Bank 2003a, 2004, 2005a).

# _Sectoral effects_

Many survey datasets analyzed in Table 7 do not contain detailed sector identifiers which would allow households to be allocated to particular activities. Despite these limitations, it is important to present at least a partial account of the role of sectoral reallocation in the evolution of inequality. This is closely related to changes in the sectoral composition of employment in transition. Inter-sectoral differences during the period from 1998 to 2002 increased their contribution to overall inequality in Russia from 2 to 6 percent, but remained stable in Poland at around 6 percent. The share of services in overall inequality expanded in both Russia and Poland, but whereas the services sector is the most unequal in Poland, it is the second most unequal after manufacturing in Russia.<sup>15</sup> Agriculture does not seem to play an active role in those countries.

The taxonomy presented in this section can be used to assess what course possible changes in inequality might take for a particular country compared to other countries in the region. Should one expect inequality in Russia, for example, to increase further? This could happen to some extent, reflecting increases in education premia and possibly, but not necessarily, worsening of inter-regional inequality. So far Russia has been lagging behind countries such as Hungary, Poland and Romania in the size of the wage

> 15 The results of sectoral decompositions are not reported in Table 7 but are available from the authors on request.

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