Coping with the Crisis: Public Safety Nets and Reliance on Government in the Wake of the Global Economic Crisis of 2008-2009

Abstract

This paper examines how people in transition countries coped with the impacts of the global economic and financial crisis of 2008-2009. The data indicate that households in these countries were hit harder than those in other regions of the world. We consider how transition country households coped with the difficult circumstances, how their government social safety nets performed, and how the experience has affected their views on redistribution. The first research question examined is the performance of public safety nets in transition countries during the global economic crisis, estimating models explaining which citizens relied on specific safety net programs, including unemployment benefits, housing support, child support, and targeted social assistance programs. We also tackle the question of whether residents of transition countries have a strong taste for income redistribution via taxation as a form of insurance. We explicitly test the whether the possibility of upward mobility (POUM) hypothesis holds. Data used in this study are from the European Bank for Reconstruction and Development (EBRD) Life in Transition Survey (LITS I and LITS II for the years 2006 and 2010, respectively).