Poverty Dynamics in Poland. Selected Quantitative Analyses

The present report summarises the outcome of a research project carried out jointly by researchers of the Polish Center for Social and Economic Research Foundation (CASE) and the German Centre for European Economic Research (ZEW) and funded by the Volkswagen foundation. The objective of this project is to analyse the mechanisms at work in the rise and persistence of poverty during transition in Poland, as well as its consequences for selected groups of the population. The transition process from a centralised to a market economy in Poland has been accompanied by an unprecedented increase in poverty and a deepening of inequality across households - not only in terms of income but also in terms of socio-economic status. Although a small number of studies describing the economic situation of the poor in Poland have been undertaken, our understanding of the mechanisms that make poverty persist in the household context is considerably limited. The interaction of a number of factors may for example, result in individuals being trapped in a vicious circle of poverty. Low household income may lead to social exclusion and family distress, which is likely to have far-reaching consequences for all household members. Social exclusion may contribute to foster alcoholism, impede the human capital investment in children, and thus jeopardise the socioeconomic situation of the next generation. Socially excluded people experience severe difficulties in finding re-employment. Social transfers might even worsen the situation by providing a disincentive to seek work. We need to understand the causes underlying the developments in social and economic hardship of Polish families during the course of the transition process. The introductory chapter therefore offers a general look at the picture of poverty in Poland; trends and new research results are described. In order to improve our understanding of the causes of social exclusion and to contribute to filling the gap in research we do not, however, restrict our attention solely to the analysis of the extent and nature of poverty in general but rather focus our analysis on issues that have been somewhat overlooked. This project contributes to the literature by investigating empirically different dimensions of the poverty debate in Poland - ranging from social exclusion through the relationship between transfers and labour supply to the transmission of poverty across generations. The empirical analyses are carried out on the basis of individual and household histories which are observed in the Polish Labour Force Survey and of administrative data on social assistance beneficiaries.