The Impact of Market-oriented Reforms on Inequality in Transitional Countries: New Evidence from Cuba

In the 1990s, the Cuban government implemented a set of market-oriented reforms in order to cope with the economic crisis caused by the collapse of the Soviet Union. These reforms were followed by a sharp increase in inequality. This rise in inequality can be best understood by looking at what profitable economic exchanges are made possible to which actors by the reforms. Using survey data specifically collected in Havana, we show that new opportunities to accumulate wealth accrue to actors who occupy positions whereby they can legitimately access exchanges that take place in hard currency. This advantage holds for both entrepreneurs and state employees, who work for state-owned enterprises operating in emergent sectors (intrapreneurs), suggesting that the distinction between market and plan is not paramount to explain inequality. Furthermore, actors that do not have legitimate access to exchanges in hard currency benefit from their personal ties to those actors that do