urban employed in China were working in State-owned enterprises _(China Statistical Yearbook 2003)_ .

Most importantly, a comparison of wage inequality in China and Russia suggests that, while returns to education were negligible in China, but not in Russia in 1989, subsequent developments led to an increasing education premium becoming a stronger driver of wage increases in China, albeit from a lower base. In Russia, in contrast, it played a less prominent role in explaining the evolution of wage inequality.

The analysis of regional differences, which played a dominant role in explaining the development of inequality in China, suggests that there are significant impediments to the operation of market forces. Thus, Shi, Sicular and Zhao (2002) explore the question of rural-urban inequality in greater detail for nine different provinces using the China Health and Nutrition Survey (CHNS). Once differences in living costs are taken into account, the authors conclude that the apparent labor market distortion in the form of registration system and other impediments for migration amounts to a rate of apparent taxation on rural wages of 81 percent. Shi (2002) finds that 28 percent of the rural urban wage difference can be explained directly via the coefficient on registration. Inasmuch as impediments to migration reflect distortions inherited from the command economy, the large role of regional factors as drivers of wage inequality in China and Russia is a phenomenon related to transition. Further reforms in product and labor markets in both countries can be expected to lead to greater equalization of wages across regions.

Would faster growth in the transition countries of Eastern Europe and the former Soviet Union be accompanied by increasing inequality on a scale similar to that in China? Inasmuch as the latter derives from the rural-urban divide, namely, migration from the former to the latter and rapid changes in the sectoral composition of output, a classic development phenomenon for which there is no obvious analogue for the transition countries discussed earlier in the paper, the answer is negative. However, looking forward, it is also likely that transition-related factors will become less important in the evolution of inequality in Eastern Europe and the former Soviet Union compared to factors such as technological progress, global changes in skills premia, the effects of demographic changes and migration. To the extent that China’s income distribution is influenced by its increasing integration in world markets, its experience is relevant for Eastern Europe and the former Soviet Union which have also been integrating into the global economy in pointing to the role of such long-term factors. That analysis remains to be done.

# **VII. CONCLUSIONS AND POLICY IMPLICATIONS.**

By the early 2000s, the transition countries of Eastern Europe and the former Soviet Union exhibited the full spectrum of inequality outcomes, from fairly unequal to fairly equal. Indeed, developments in economic growth and income inequality over different time periods have been sufficiently rich and varied in Poland and Russia, metaphors respectively for Eastern Europe and the Commonwealth of Independent States and also in China to cast doubt on any easy generalization on the relationship between growth and 36