Social Assistance and Poverty Reduction During the New Communist Era

Abstract

The recent growth period in the republics of the Former Soviet Union (FSU) has been accompanied by a resurgence of populist policies managed by communist or post-communist governments. Are these policies able to improve household welfare? The paper moves beyond an incidence analysis to assess the impact of social assistance beneFIts on household welfare in Moldova between 2001 and 2004, the entire first mandate of a re-elected communist government. If we ignore standard issues of impact evaluations such as selection bias, behavioral responses, unobserved heterogeneity and endogeneity, an incidence analysis suggests that increased spending on social assistance enhances the probability of moving out of poverty and reduces the probability of moving into poverty. However, double difference estimates based on a mimicked randomized experiment and parametric estimates based on panel data which are able to control for at least some of these factors indicate that social bene.ts have not contributed to improve household welfare or reduce poverty. Double di¤erence estimates point to a negative impact on welfare. Parametric estimates do not evidence any consistent significant impact on welfare or poverty. We derive that the sharp growth in population coverage and expenditure on cash benefits that characterized social assistance policies in recent years has not resulted in a significant improvement in welfare, all other factors being equal.