Poverty and Targeting of Social Assistance in Eastern Europe and the Former Soviet Union
Ref. no. 680-33
Declining incomes and growing income inequality have led to a rise in poverty in the transition economies of Eastern Europe and the former Soviet Union. But the effects have been uneven across different population groups, regions, and types of households.
The objective of this research project is to establish association, and even causality, between different factors--such as education, locality, age of household head, and number of household members--and vulnerability during the period of transition. The study covers four countries in Eastern Europe (Bulgaria, Hungary, Poland, and the Slovak Republic) and four countries in the former Soviet Union (Armenia, Estonia, the Kyrgyz Republic, and Russia).
Increased poverty causes difficulties for social assistance agencies in transition economies, both because fiscal resources are usually insufficient and because many people apparently qualify. This leads to the presence of many small programs with large "leakages" to the less needy. Thus, if social assistance is not provided effectively, scarce resources will be wasted, and chances to reduce poverty missed.
Using household income and expenditure data (from regular or Bank-sponsored household budget surveys) from the eight countries for 199395, the study attempts to answer two questions: What are the determinants of poverty in transition economies? And what types of households are systematically favored or discriminated against in the allocation of social assistance?
Not unexpectedly, the study has found that education and unemployment play an important part throughout the region (the first by raising income, the second by reducing it). The importance of locality (large city versus rural area), age of the household head (pensioner or employed), and gender of the household head differs among the countries, reflecting differences in such policies as those toward pensioners or protection of the real value of family benefits.
In some countries the study found systematic discrimination in the allocation of social assistance--that is, higher or lower access to social assistance than predicted. Access to social assistance varied depending on place of residence (for example, rural areas are helped more than expected in Hungary, but less than expected in Russia). It also varied according to ownership of such household durables as a car or color TV, clearly indicating an implicit means-testing of social assistance (which seems to be particularly strong in Poland). In almost all the countries, everything else equal, female-headed households are more likely than male-headed households to be helped.
The study has created a large database with data from the eight surveys. The database contains more than a hundred variables, identically defined (to the extent possible) across the surveys. The variables include the level and composition of income and expenditures and such personal and household attributes as education level, place of residence, and ownership of consumer durables. The database, which consists of about 4 million data points, will be available to interested researchers in SAS and STATA software within the next year.
Responsibility: Policy Research Department, Poverty and Human Resources Division--Branko Milanovic (bmilanovic@worldbank.org) and Yvonne Ying; Poverty and Social Policy Department--Jeanine Braithwaite; Environment Department, Social Policy and Resettlement Division--Christiaan Grootaert and Gi-Taik Oh; and Europe and Central Asia, Country Department II, Human Resources Operations Division--Sandor Sipos. With Robert Ackland; Mark Foley; Thesia Gardner, U.S. Bureau of Labor Statistics; Sassoun Tsirounian, University of Yerevan, Armenia; Alexandra Posarac; and Maria Balaz. The U.S. Department of Labor is contributing staff time.
Completion date: September 1997.
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