IDEAS home Printed from
   My bibliography  Save this paper

Social costs of the transition to capitalism : Poland, 1990-91


  • Milanovic, Branko


The Polish stabilization program implemented in 1990 as part of the transition to capitalism entailed unexpectedly high social costs. The often unstated assumptions had been that since central planning was intrinsically inefficient, stabilization in Poland might be less costly in terms of lost output than it would have been in a market economy. The idea was that recession stemming from an overall decline in demand could be moderated by removing the administrative barriers that in a planned economy hindered the best deployment of resources. The results were the reverse of expectations. Unemployment reached 12 percent of the labor force by the end of 1991, and real incomes plummeted (by about 40 percent). An estimated 17 percent of the population lived in poverty in 1989. By 1991, that figure reached 34 percent. The poverty rate more than doubled for all social groups except pensioners, for which it remained stable. Large households, and children in particular, were especially affected. The poverty gap rose from an estimated 1.4 percent of GDP to 4.8 pecent. Existing evidence on income distribution shows that it did not change. There was a slight compression of income among farmers, which has also occurred in the past when real incomes declined, and possibly some wage-stretching among workers. What happened to the general welfare? Conclusive results are elusive. Personal consumption, overall decreased. Queuing also decreased, but utility gains from shorter lines were offset as real wages, and thus the opportunity cost of waiting declined. Real appreciation of the exchange rate raised dollar wages substantially and led to an upsurge in consumer imports, thus decreasing the utlility derived from the ownership of consumer durable.

Suggested Citation

  • Milanovic, Branko, 1993. "Social costs of the transition to capitalism : Poland, 1990-91," Policy Research Working Paper Series 1165, The World Bank.
  • Handle: RePEc:wbk:wbrwps:1165

    Download full text from publisher

    File URL:
    Download Restriction: no


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Frank Wykoff, 2001. "Creating Capitalism: Politics, Reforms, and Economic Performance," Claremont Colleges Working Papers 2001-17, Claremont Colleges.
    2. Gevorkyan, Aleksandr V., 2015. "The legends of the Caucasus: Economic transformation of Armenia and Georgia," International Business Review, Elsevier, vol. 24(6), pages 1009-1024.


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:1165. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.