Abstract:

"...I saw discrimination lead to poverty, I saw episodic high levels of unemployment, I saw business cycles, and I saw all kinds of inequalities…." [Joseph Stiglitz, June 5, 2012]

Most of the Post Soviet countries and among them Georgia shows a fast growing asymmetry in the distribution of income and wealth during transition period. In the paper, it is analyzed the determinants of inequality in Georgia starting with the factors influencing the changing distribution of wages and income being at the core of economic inequality.

Inequality should also be framed in a broader sense than income, e.g. inequality in consumption, or inequality of resources, including assets and wealth. Not very surprisingly, a strong correlation between output loss in the early phase of transition, the rise of inequality measures and the change of Gini coefficient which is a measure of inequality.

The main purpose of this paper is a discussion and analysis of the development of inequality in Georgia and the reasons for the observed increase of inequality.

In the paper are considered and analyzed:
• The current situation of inequality in Georgia well as its development
since 1990 taking into account the profound political, economic as well as social transition having occurred in Georgia;
•The development of average inequality in the regions of Georgia where we see that in all of these regions the liberalization of markets led to a sudden rise in income dispersion;
• The fall of labor demand as well as the liberalization of labor market regulations which were accompanied by the emergence of all kinds of regulated forms of employment;
• The elimination of legal restrictions on private business activity and ownership that gave rise to self-employment throughout country. In particular, the sharp and persistent fall in labor demand of enterprises forced workers to move into low-productivity jobs in the service sector or subsistence agriculture. In many regions of Georgia social protection is lacking and the status of unemployment is not an affordable option and labor supply was reduced.

Methodology:
To state the desirable properties of measures of inequality when the variable under study is ordinal and check which properties are fulfilled by the various indicators.

Conclusions:
• The main indicators which were choice by research are highly correlated with others for studying of economic inequality’s in Georgia;
• Middle class is not formed in Georgia and differences between rich and low classes are very high;
• The data by state statistics is not presented for these indicators in series by years consistently. This fact is influenced on dispersion.

Keywords:

Inequality, labour demand, social protection, measures of inequality, unemployment, income distribution.