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Re-evaluation of Welfare Changes during the Transition in Poland

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  • Sonya Kostova Huffman
  • Stanley R. Johnson

Abstract

The costs of shortages and rationing are not captured by standard consumer price indices. Thus the change in real gross domestic product (GDP) per capita is an overestimate of welfare losses in transition economies. In this study the authors use virtual prices to calculate new cost-of-living indices, making it possible to construct more accurate pre- and post-reform welfare comparisons. The results for Poland using virtual prices show a 62 to 84 percent decline in welfare over the transition period of 1987 to 1992. This welfare loss is approximately one-third the value obtained using actual prices.

Suggested Citation

  • Sonya Kostova Huffman & Stanley R. Johnson, 2000. "Re-evaluation of Welfare Changes during the Transition in Poland," Center for Agricultural and Rural Development (CARD) Publications 00-wp255, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    • Handle: RePEc:ias:cpaper:00-wp255
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    References listed on IDEAS

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    1. Barten, A. P., 1969. "Maximum likelihood estimation of a complete system of demand equations," European Economic Review, Elsevier, vol. 1(1), pages 7-73.
    2. Atkinson,Anthony Barnes & Micklewright,John, 1992. "Economic Transformation in Eastern Europe and the Distribution of Income," Cambridge Books, Cambridge University Press, number 9780521438827.
    3. Neary, J. P. & Roberts, K. W. S., 1980. "The theory of household behaviour under rationing," European Economic Review, Elsevier, vol. 13(1), pages 25-42, January.
    4. James Banks & Richard Blundell & Arthur Lewbel, 1997. "Quadratic Engel Curves And Consumer Demand," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 527-539, November.
    5. Mundlak, Yair & Larson, Donald F, 1992. "On the Transmission of World Agricultural Prices," The World Bank Economic Review, World Bank, vol. 6(3), pages 399-422, September.
    6. Podkaminer, Leon, 1988. "Disequilibrium in Poland's consumer markets: Further evidence on intermarket spillovers," Journal of Comparative Economics, Elsevier, vol. 12(1), pages 43-60, March.
    7. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-326, June.
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    Cited by:

    1. Huffman, Sonya K. & Ishdorj, Ariun & Jensen, Helen H., 2005. "Consumer Choices and Welfare Gains from New, Healthy Products: A Virtual Prices Approach," ISU General Staff Papers 200501010800001012, Iowa State University, Department of Economics.

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