Consumption smoothing during the economic transition in Bulgaria

Abstract

In this paper, we use monthly data from a panel of households in Bulgaria in 1994 to examine the extent to which households are able to protect their consumption from fluctuations in real income. The empirical analysis reveals that consumption is protected only partially from idiosyncratic fluctuations in income. In general, households smooth food consumption by adjusting their non-food expenditures and by borrowing through formal and informal credit markets. Overall, inter-household transfers play a limited role in insuring consumption. The extent of consumption smoothing varies across regions and across household characteristics. Food consumption also appears to be less protected from changes in food prices than it is from changes in household income. Journal of Comparative Economics32 (2) (2004) 328–347.