Transformations  in
Business & Economics

Reflection of Income Inequality on Consumption Expenditure: The Case of Latvia
Baiba Šavriņa, Inese Kalnmeiere

ABSTRACT. This paper analyses the actual and inherent national economy problems for any of the transition period countries, i.e. the impact of the socio-economic differentiation on social inequality and the potential for economic growth. The author evaluates the substantial political and economical changes of the turn of the 21^st century that occurred both in Europe and Latvia by emphasizing the specific features of the situation of Latvia. These alterations have modified the frame of the society and economy in many countries. Special attention is paid to the characteristics of the transition period situation which established a new system of values thereby influencing both rural and urban evolution. An accent is put on the social stratification and the polarization processes which arose due to the economic restructurization. These changes have been causing overall development of social tension and increasing the social segmentation. Such marginalization processes enlarge both the possibility of social stagnation in the territorial aspect and put greater demands for social policy. Changes in income distribution also encouraged changes in social order.

KEYWORDS: inequality, income distribution, material well-being, consumption, sustainable consumption, Latvia.

JEL classification: P46, H24, Q56, P2.