What is it about?
Abstract Can Eastern European families most severely impoverished during the transition to capitalism rely on private family safety nets? This question is likely critical for the transition's success, but little is known about family networks in Eastern Europe. We analyze newly available Polish household surveys, conducted both before and after Poland's economic transition, which measure private inter-household transfers. Such transfers are large and widespread in Poland, and in many ways they appear to function like means-tested public transfers. They flow from high to low-income households and are targeted to young couples, large families and those experiencing illness. Private transfer patterns suggest that they are responsive to liquidity constraints. Our results from 1987 data indicate that private transfers could fill a non-trivial portion of the income gap left by unemployment. But we also find evidence from 1992 data that family networks weakened somewhat after the transition.
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Why is it important?
Private transfers are responsive to the economic status of households in a way that suggests they could be an important factor in ensuring the safety net during Poland's economic transition. Our simulation with 1987 data of the response of private transfers to loss of earnings of the household head indicates that a substantial fraction of lost income could be replaced by a boost in private transfers--up to 22 percent of lost earnings for households with only one worker.
Perspectives
Over the two time periods for which data were available (1987 and 1992) the transfer functions appear quite stable. The primary difference is that transfer amounts (both receipts and gifts) appear less responsive to pre-transfer income in 1992 compared to 1987. However, the private transfer amounts were much lower in 1992 than in 1987. This may indicate that, with imperfect capital markets, the ability of inter-household networks to cushion shocks is weaker, since most households were affected simultaneously by economic downturns.
Professor Wlodzimierz Okrasa
Cardinal Stefan Wyszynski University in Warsaw
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This page is a summary of: FAMILY SAFETY NETS AND ECONOMIC TRANSITION: A STUDY OF WORKER HOUSEHOLDS IN POLAND, Review of Income and Wealth, June 1997, Wiley,
DOI: 10.1111/j.1475-4991.1997.tb00214.x.
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