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Subjective perceptions of the impact of the global economic crisis in Europe and Central Asia : the household perspective, Volume 1
 
Author:Bidani, Benu; Fatou Diagne, Mame; Zaidi, Salman; Collection Title:Policy Research working paper ; no. WPS 5995
Country:Europe and Central Asia; Date Stored:2012/03/12
Document Date:2012/03/01Document Type:Policy Research Working Paper
SubTopics:Rural Poverty Reduction; Housing & Human Habitats; Labor Policies; Consumption; Safety Nets and TransfersLanguage:English
Region:Europe and Central AsiaReport Number:WPS5995
Volume No:1  

Summary: 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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