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Subjective perceptions of the impact of the global economic crisis in Europe and Central Asia : the household perspective

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  • Bidani, Benu
  • Fatou Diagne, Mame
  • Zaidi, Salman

Abstract

This paper analyzes the subjective impact of the global economic crisis on households in Europe and Central Asia and relates subjective impacts to consumption, actual shocks, and coping strategies, using the 2010 Life in Transition Survey. Two-thirds of respondents in Europe and Central Asia report their household was subjectively affected, primarily through the labor market. The findings underscore the limitations of cross-country comparisons of subjective perceptions, due to reporting biases. Within countries, richer households felt a decline in their relative income position, consistent with evidence from household budget surveys that the crisis reduced the consumption of the middle and upper classes. But the analysis also finds that poorer households report being (subjectively) affected by the crisis more. Differences in the feasibility of coping strategies may help explain variations in subjective perceptions: the poorest were forced to reduce their staple food consumption and health spending, and tended to depend on public safety nets. Richer households had more options to cope, pursuing so-called"active strategies"(such as increasing their labor supply), borrowing, and cutting spending on non-essentials. Transition countries differed significantly from western European comparator countries in that public safety nets had lower coverage, private safety nets and informal insurance mechanisms could not meet the shortfall in income, and a large proportion of their populations reduced the consumption of basic necessities. The paper finds subjective perceptions of the impact of the crisis to be relevant to socio-political outcomes: the harder the impact, the lower the life satisfaction level and the more negative the assessment of government performance.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 5995.

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Date of creation: 01 Mar 2012
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Handle: RePEc:wbk:wbrwps:5995

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Keywords: Safety Nets and Transfers; Housing&Human Habitats; Rural Poverty Reduction; Labor Policies; Consumption;

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  1. Lokshin, Michael M. & Yemtsov, Ruslan, 2001. "Household strategies for coping with poverty and social exclusion in post-crisis Russia," Policy Research Working Paper Series 2556, The World Bank.
  2. Gaurav Khanna & David Newhouse & Pierella Paci, 2010. "Fewer Jobs or Smaller Paychecks? Labor Market Impacts of the Recent Crisis in Middle-Income Countries," World Bank Other Operational Studies 10197, The World Bank.
  3. Easterlin, Richard A., 1995. "Will raising the incomes of all increase the happiness of all?," Journal of Economic Behavior & Organization, Elsevier, vol. 27(1), pages 35-47, June.
  4. Salman Zaidi & Asad Alam & Pradeep Mitra & Ramya Sundaram, 2009. "Satisfaction with Life and Service Delivery in Eastern Europe and the Former Soviet Union : Some Insights from the 2006 Life in Transition Survey," World Bank Publications, The World Bank, number 5955.
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