W O R L D B A N K W O R K I N G P A P E R N O . 3 4 Mapped In or Mapped Out? The Romanian Poor in Inter-household and Community Networks Maria Amelina Dan Chiribuca Stephen Knack THE WORLD BANK W O R L D B A N K W O R K I N G P A P E R N O . 3 4 Mapped In or Mapped Out? The Romanian Poor in Inter-household and Community Networks Maria Amelina Dan Chiribuca Stephen Knack THE WORLD BANK Washington, D.C. Copyright © 2004 The International Bank for Reconstruction and Development / The World Bank 1818 H Street, N.W. Washington, D.C. 20433, U.S.A. All rights reserved Manufactured in the United States of America First printing: June 2004 printed on recycled paper 1 2 3 4 06 05 04 World Bank Working Papers are published to communicate the results of the Bank's work to the development community with the least possible delay. The manuscript of this paper therefore has not been prepared in accordance with the procedures appropriate to formally-edited texts. Some sources cited in this paper may be informal documents that are not readily available. The findings, interpretations, and conclusions expressed in this paper are entirely those of the author(s) and do not necessarily reflect the views of the Board of Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply on the part of the World Bank any judgment of the legal status of any territory or the endorsement or acceptance of such boundaries. The material in this publication is copyrighted. The World Bank encourages dissemination of its work and normally will grant permission for use. Permission to photocopy items for internal or personal use, for the internal or personal use of specific clients, or for educational classroom use, is granted by the World Bank, provided that the appropriate fee is paid. Please contact the Copyright Clearance Center before photocopying items. Copyright Clearance Center, Inc. 222 Rosewood Drive Danvers, MA 01923, U.S.A. Tel: 978-750-8400 · Fax: 978-750-4470. For permission to reprint individual articles or chapters, please fax your request with complete information to the Republication Department, Copyright Clearance Center, fax 978-750-4470. All other queries on rights and licenses should be addressed to the World Bank at the address above, or faxed to 202-522-2422. ISBN: 0-8213-5888-X eISBN: 0-8213-5889-8 ISSN: 1726-5878 Maria Amelina is Senior Social Development Specialist in the Environmentally and Socially Sus- tainable Development unit of the Europe and Central Asia Region at the World Bank. Dan Chiribuca is Associate Professor of Sociology and Social Work at "Babes-Bolyai" University and Research Director at the Metro Media Transilvania Institute of Social Studies, Polls, Marketing and Advertising in Cluj-Napoca, Romania. Library of Congress Cataloging-in-Publication Data has been requested. TABLE OF CONTENTS Acknowledgments v 1. Introduction 1 Description of the Study 2 Main Findings 3 Policy Implications 5 2. Sources of Income--An Overview 7 Public and Private Formal Transfers 7 Formal Private Social Flows 12 Formal Private Organizations 17 Informal Income 17 3. Informal Inter-household Flows 19 Informal Inter-household Flows by Category 19 Maps of Inter-household Transfers 25 4. Who Participates in Informal Transactions? 35 Household Welfare 35 Household Characteristics 37 Social Capital 37 Inter-household Flows: Multivariate Tests 37 5. Social Capital, Local Governance, and Empowerment of the Poor 41 Social Capital and Access to Resources--The Case of Triple Exclusion? 41 Social Capital, Local Governance, and Public Assistance 44 Social Capital and Quality of Public Service Delivery 46 Decentralization and Local Government Efficacy 51 6. Policy Implications 53 Appendices 55 A 55 B 75 C 85 References 87 iii ACKNOWLEDGMENTS M any colleagues contributed to the design, data collection, and analysis. We thank Emanuela Galasso, Philip Keefer, Ghazala Mansuri, Alexandre Marc, Dena Ringold, and Claire Wallace for helpful and insightful comments. Alina Barsan assisted in the design of the survey and in the data collection. Nils Junge and Victor Giosan provided background information. Mirca Comsa, Lu Wang, and Min Ouyang assisted in data analyses. Leah Cohen and Diana Marginean edited and formatted the final version. We also would like to thank the public officials, NGO leaders, and experts who participated in seminars held in Bukharest, Cluj, and Iasi for feedback and suggestions. The Institute of Advanced Studies (IHS) and Metro Media Transilvania helped to design the study and carry out the field work. The World Bank Resident Mission in Romania, most promi- nently Richard Florescu, helped with the logistics. Indicators on Local Democratic Governance in CEE designed by the Tocqueville Research Center and the Local Government and Public Service Reform Initiative (LGI) of the Open Society Institute (Hungary) informed the design of the public officials' questionnaire used in the survey. We gratefully acknowledge the grant from the Austrian Trust Fund. All errors and omissions are ours. v CHAPTER 1 INTRODUCTION S adly, all societies have a sizeable share of economically disadvantaged. Does this economic disadvantage translate into a social one? How do the two interact? At different stages of economic development and collective consciousness, both individual social groups as well as countries search for answers to the former, while social scientists seek to provide different explanations for the latter. In modern richer economies the accepted practice is for the state to formally redistribute resources in the form of public transfers to more vulnerable groups. The danger of such a formalized arrangement in the eyes of some prominent economists (Becker 1974, Barro 1974) has been the "crowding out" of private informal transfers--a traditional form of support among households. Empirically, however, no consistent evidence of such a "crowd out" effect has been found. At the formal societal level, the phenomenon is explained by a long tradition of public support in developed countries as well as by a long and growing tradition of private philanthropic giving (Cox etal. 1999). At the informal household level, even though time series for private transfers of equal length are lacking, there has been no evidence of the replacement of private transfers by public flows (Cox and Jakubson 1995, King and McDonald 1999, Ward-Batts 2001). Regardless of interpretations for such transfers, be it altruistic giving (Andreoni 1989, Samuelson 1993, Coate 1995, Barrett 1999) or an insurance mechanism (Coate and Ravallion 1993, Platteau 1995), informal transfers are observed to flow to poorer relatives. In the developing countries, due to the paucity of formal public flows, the pro-poor nature of informal transactions stands out yet more dramatically as inter-household transfers are observed to play the role of means-tested benefits. (Gibson etal. 1998, Cox etal. 1999, Cox 2002, Jimenez etal. 2001). Where does this leave the transition economies? On the one hand, post-socialist states have a tradition of non-targeted universal state support, arguably, creating a culture of dependency (Milanovic 1995). On the other hand, the need to obtain goods informally in a shortage economy 1 2 WORLD BANK WORKING PAPER in conjunction with the oppressive nature of the state and the desire of a large share of the population to hide from its controlling eye, breed mistrust of collective action in general and of the community members with whom they are not personally familiar in particular (Verdery 1996, Ledeneva 1998, Scott 1998). How do these dynamics reflect on the position of the poor in society and in social and economic networks? In post-socialist times in Central European countries in general and in Romania in particular strong social ties connecting relatives, immediate friends and associates are observed to have become stronger, while the weak ties connecting individuals and households through professional and social associations have become weaker (Manning etal. 2000, Toth and Sik 2002, Stanculescu 2002). The poor are reported to be falling out of both types of associations. Strong familial and friendly networks have become difficult to maintain because of high maintenance costs, such as reciprocal gift giving and costs of transportation and telecommunication. Weak associational networks have become less accessible to the poor as well, due to the high costs of accessing newly reconfigured social networks on the one hand and the disassociation from old networks through loss of employment and migration to rural areas on the other. Another reported reason for the low levels of inclusion of the poor in voluntary organizations in the post-communist states may be the de facto closed, elitist nature of formal associational life. These patterns of voluntary mobilization contrast with the bridging role of associations in western democracies and need to be examined in greater detail (Uslaner 2003). It is also important to assess more precisely if these conflicting trends lead to a double exclusion of the poor from private and public, formal and informal networks. Such exclusion is likely to lead to increased vulnerability, inability to adjust to the realities of the market environment, and, therefore, increased dependency on the state for immediate subsistence and for reintegration into broader social networks and the labor force. Better understanding of the whole universe of exchanges accessible or not accessible to poor households is very important to make public policies of redistribution more sensitive to these trends and thus better targeted. Description of the Study This volume analyses patterns of economic and social interactions that sustain the poor or, alternatively, isolate them yet further from other households, from the communities in which they live and, by extension, from social networks and economic opportunities. The study also assesses interactions of the poor with local and central government in terms of the level of trust and satisfaction with public officials, the level of involvement in public actions and public decision-making, and the ability of local governments to respond to the needs of their poorer constituency, especially in providing social assistance and other Minimum Income Guarantee (MIG) benefits. This study examines the associations that have not been adequately considered when assessing the well-being of the poor. These are: transfers between poor households and formal private associations; transfers made to and from poor households within informal inter-household networks-- (friends, relatives, close associates); association between the level of income of a household and a community, and participation in collective action and local government decision-making; effects of legacy (historical forms of governance) and ethnicity on patterms of trust in local government, public interaction, and perceived corruption. Mapping out the universe of these interactions from the position of the poor is the primary goal of this analysis. To study patterns of formal and informal transfers and relate them to the characteristics of households and of communities, a nationally representative household survey was carried out. The survey covers household income and transactions for 2002 and includes expanded sections on: 1) MAPPED IN OR MAPPED OUT? 3 informal inter-household transactions (gift giving, exchanges, and barter), 2) channels through which resources flow to and from households (between relatives, friends, and other informal associates), and 3) forms these flows take (cash, goods, or services). The survey also captures social capital aspects of the socialization of the poor in terms of generalized and specific trust, cooperation with other community members, and participation in formal and informal collective action.1 The survey assesses the sense of control and optimism, the perception of the respondents' ability to influence government decision-making, and the satisfaction with services provided by local and national government. A parallel survey of local public officials carried out in the same localities helped relate the views of local officials on the effects and effectiveness of government activities to community perceptions of the quality of public service provision and other public interest issues.2 Quantitative study was complemented by qualitative analysis. Seventeen focus group sessions conducted with poor and average income inhabitants of urban and rural communities provided examples of interactions between community members and public and private service providers. A separate subset of focus sessions was conducted with poor urban and rural Roma groups and with public and private service providers. Main Findings The study finds the poor to be at a disadvantage in familial, social, and public networks. Formal private transfers flow away from poor households. Consistent with the findings for other CEE countries, weak associational ties within private networks de facto act as strong closed networks catering to their immediate membership and demonstrating little altruistic interest in the poorer members of the community. This study shows that clubs and professional and special interest associations primarily channel resources to better-off households, who are more likely to be their members. At the same time, the poor, particularly the rural poor, contribute disproportionately to many organizations, particularly to church groups. This is consistent with data from some developed countries, where church related transfers were found to be regressive.3 Informal inter-household flows are income neutral. These results run counter to the economic literature on inter-household transactions, which finds the net effect of informal flows in developing countries to favor poorer and more vulnerable households and to act as means-tested public transfers. However, the finding is consistent with recent sociological studies of transitional economies noted above, which show post-socialist dislocation to cause rifts in informal ties, thereby diminishing access for the poor to the informal networks to which they once belonged. A detailed block of questions, in the study, on types and channels of informal transactions among households revealed much more active participation of the population as a whole in informal transactions than is captured by traditional budget surveys. Ninety-seven per cent of respondents reported participating in informal gift giving and exchanges, with similar shares of poor and better-off households participating in informal inter-household transactions. The reason for the low or negative net effect of informal inter-household transfers is not the paucity of transactions, but the prevalence of outflows over inflows for most types of informal transactions. Informal transfers as a share of total income before informal transactions are reported to constitute on average 8.5 per cent of household income for inflows and 12.3 per cent for outflows. A higher share of outflows for all income groups is attributed to three factors: 1) a high 1. Compared to the majority of budget household level surveys this study examines consistently both the income and the expenditure effects of informal transfers, looking at gift giving and exchanges symmetrically, both as a source of revenue for a household and as an expenditure item. 2. The questionnaires can be viewed at http://www.worldbank.org/romania/povertyassessment. 3. For contributions of the poor to religious charities in the US, see Verba etal. (1995). For a definition of progressive/regressive transfers, see footnote 3. 4 WORLD BANK WORKING PAPER level of transfers from rural households in foodstuffs and financial assistance (from pensions and sale of agricultural output) of rural parents to adult urban children and other relatives; 2) the high price for poor households of remaining in networks including higher income households (the price of symbolic capital); and 3) the patterns of recollection, with respondents remembering the smallest gifts, exchanges and payments flowing out of the household (higher frequency, lower value of transactions), while recalling only the larger gifts, payments and exchanges flowing in (lower frequency, higher value). The important difference captured in the study is the qualitative difference in types of transactions accessible to poorer and richer households. The poor are less likely to participate in altruistic gift-giving and more likely to engage in reciprocal transactions, such as exchanges of goods and services, as well as payments for minor services (minor repairs, child care, and tutoring). About one half of all households are involved in informal lending. For the poor, lending and borrowing comes in the form of multiple transactions that are small in value, and help smooth consumption for a household anticipating monthly public assistance or public benefits transfers (pensions, minimum income assistance, and child allowances). This pattern graphically shows at the individual household level the interconnection of private and public flows as a single risk management system, with public assistance leveraged against informal flows from neighbors, friends, and sometimes relatives. The poor have lower levels of trust in neighbors and other people in general. The poor are not as connected and have markedly fewer people they can rely on in solving pertinent life problems (health, legal, administrative, problems with the police, bank, assistance in getting a job). Lower levels of trust and participation translate into lower "dividends" from social capital, such as assistance in need and informal help with employment. In this context assistance from the government becomes particularly important. Indeed, poor and rural households are more likely to trust both local and national government and be satisfied with services provided. This may be the result of lower expectations of the poorer and less educated population strata or it may reflect the high level of dependence on the government by those excluded from private networks. Hopefully, it is also the result of the effort and performance of local governments, particularly those in small rural areas where local administrators know most of their constituency personally and are more open to public scrutiny. The MIG programs, despite a number of flaws discussed in more detail below, appear to be well-targeted to poorer households with lower incomes, a high number of children, and fewer assets. On balance, the evidence from this survey suggests that poorer and rural households may suffer "triple exclusion." Not only do formal and informal market and inter-household activities favour rich and urban households, they also appear to have a more effective voice with respect to government services. Households from the richest quintile and urban dwellers are more likely to be "civic activists"; attend public meetings, participate in protests, and alert the media to local problems. They are twice as likely as households in the poorest two quintiles to contact local officials about a public issue, and ten times as likely to contact national officials. Because of their higher incomes, they are also more capable of pursuing better public services through informal means. Richer households offer "gifts" to public officials more often to help resolve their problems. At the community level, controlling for other variables, households living in localities with higher levels of civic activism (measured by an index of attending public meetings, participating in protests, alerting media to local problems, notifying the police or court of local problems) receive higher MIG assistance, which may point to the positive role of accountability of local governments in MIG allocations. Another important community level finding is that poor communities have been found to be at a disadvantage in terms of access to fiscal transfers. Poor households, particularly rural poor households, are more likely to live in areas that receive less earmarked and non-earmarked transfers from the central and county governments. All public transfers except for the national Minimum Income Guarantee program (MIG) are found to be regressive. Combined with lower levels of private support, a lower ability to self-organize, lower levels of public activism among the MAPPED IN OR MAPPED OUT? 5 poor, and self-admitted higher dependence on state support these reduced flows may perpetuate the cycle of poverty and exclusion. Policy Implications The findings presented here have important policy implications at two levels. First, the study deepens our understanding of the concrete role major social assistance programs play in the livelihoods of the poor, specifically, the national social assistance program, MIG. MIG payments constitute a fairly small share of total income for the first quintile once all other income sources are taken into account (3.6 per cent), though this share increases quite substantially when the recipient households are factored out from the first decile (21.3 per cent of income for the 28 per-cent of recipient households in the sample), rather than the first quintile. However, if we take into account the anti-poor nature of other public transfers and the exclusion of the poor from informal public and private networks, the relevance of MIG payments in the livelihoods of poor households increases dramatically. The qualitative part of the study indicates that MIG is valued very highly by poor recipients, as it provides cash in hand at regular intervals and helps to leverage other transfers--informal lending, exchanges, and even ad hoc employment. At the same time, the study uncovered important institutional and organizational constraints to the improved targeting and cost-effectiveness of MIG flows. These include: 1) arbitrary allocation of MIG management resources and assessment of need by local government officials, 2) the need to finance a share of MIG-related expenditures from local budgets, which are particularly burdensome for poor and rural localities, and 3) the high costs of filing, information-gathering, and transportation faced by potential recipients in some areas. The finding that MIG assistance is higher (controlling for income and other factors) in large localities, in localities with greater locally-raised revenues, and in localities with fewer Roma suggests that adjustments are needed to improve equal access to social assistance. At the level of policy design, findings of the study can contribute to improved conceptualization and development of policymaking instruments and approaches that work. The analysis shows that the poor live in a very distinct social environment. This environment affects their economic opportunities and coping strategies, in many ways defining particular channels through which the poor access social assistance and social protection programs. The challenge for the government is to incorporate this expanded understanding of how the poor live and interact with other households, private organizations (including private service providers; trade, labor and land/forest owners associations; the church), and local government into more readily accessible and effective social programs. The finding that other public transfers are regressive at the locality level, and that the poor are less organized in voicing their discontent and working collectively for their rights should send a message to the government to broaden its pro-poor approach to public transfers. To include the poorer constituency into both decision-making and service-providing networks, local governments need to re-examine the way they interact with the poorer population. The menu of possible procedural changes includes: 1) site visits to these areas followed by concrete community level actions, 2) specialized outreach programs, and 3) other efforts that include communities in the budgetary process and the evaluation of service provision. In other words, local governments must choose from a menu of practical empowerment mechanisms that have borne fruit in other parts of the world and adapt them to local realities and circumstances (Anderson 2002). Finally, it is important to take into account ingrained traditions of interaction. Changes in social capital cannot be decreed or legislated. This study shows significant differences in the patterns of trust to communities, neighbors and the government as well as different propensity to cooperate among households residing in areas historically ruled by different empires (Habsburg vs. Ottoman). Different traditions of public administration and different levels of trust and readiness for collective actions need to be taken into account when the government considers such issues as local governance reforms or de- vs. recentralization of service provision. 6 WORLD BANK WORKING PAPER The paper is structured as follows. The second chapter presents an overview of all income sources, concentrating on public and private transfers and their role in the income of poor households. The third chapter analyses the role of various informal inflows and outflows in the livelihoods of households from different income groups. The progressive/regressive nature of these transfers for the poor quintile is assessed.4 The third chapter looks at maps of inter- household transfers in terms of: 1) the nature of relationships among transacting households, 2) the form of transactions (cash vs. in-kind), and 3) the geography of exchanges (same locality, other Romanian locality, other country). The fourth chapter discusses demographic, economic and social characteristics of households in relation to their net position as either donor or recipient of informal flows versus being uninvolved in informal transactions. Multivariate analysis is used to provide a more rigorous examination of the determinants of inter-household flows, such as vulnerability, access to public social flows, and participation in collective action. The fifth chapter examines the role of trust and collective action in the access of the poor to private and public flows. It assesses the relationship between the social capital endowment of a locality and such characteristics as ethnic diversity, the quality of public services, and the nature of local government. We note the tendency of local governments to provide better services to better organized, networked, and ethnically homogenous communities. It also points at ingrained historical nature of social capital, by relating trust to government and propensity to interact to imperial legacies (Habsburg vs. Ottoman legacies). The sixth chapter concludes with policy implications. 4. The progressive/regressive nature of transactions are used to identify the inequality-reducing or redis- tributive impact of social protection transfers. A transfer is regressive if the poorest groups receive a smaller share of program benefits than the share of the group in total consumption, i.e. when the poor benefit less relative to the rest of the population. A progressive transfer captures the opposite effect--where the poorest groups receive a larger share of program benefits than the share of the group in total consumption, i.e. when the poor benefit more relative to the rest of the population. CHAPTER 2 SOURCES OF INCOME--AN OVERVIEW T he main difference in the structure of formal income sources between the poorest and other quintiles is that household income for the poorest quintile is dominated by transfers, while for all other quintiles officially recorded salary constitutes the most important source of income (Table 1). As expected, private business is far more important for household incomes in the highest quintile than for incomes of all other quintiles. As transfers in this analysis include both public and private flows, we will examine them in turn by category. Public and Private Formal Transfers Almost half of all income in the poorest quintile comes from formal transfers (Table 1). The most important part of public transfers are social benefits, which include old age and other pensions, scholarships, and child benefits. These benefits constitute 38 per cent of total net income for the poorest quintile, with similar shares of recipients from urban and rural households, as compared to 13.3 per cent of income for high-income households. Interestingly, pensioners report leveraging their pension in negotiations with potential employers, as this secure source of income makes them more attractive as workers that may require lower payment and lower benefits. Examples of exploitation were brought up in focus group sessions: Private employers want to hire pensioners . . . because, they say, I'll give them 1 million lei [US$30.25] as wages, then they have their 2 million lei [US$60.50] from their pension, and they will be happy.5 --Average income resident, Breaza, urban 5. In 2002, the average exchange rate was 33,055.40 lei per US dollar. 7 8 TABLE 1: NET TOTAL INCOME AVERAGE FOR 2002--BY NUMBER OF HOUSEHOLDS (2,590 HOUSEHOLDS) W ORLD Informal Income by Category Informal Inter HouseholdTransfers B Formal Transfer by Category ANK Informal Other Wages, W Transfers Transfers Small Scale ORKING Net from from Agricultural Formal Earned Income Formal Formal Public Public Formal Formal Informal Production Income Private Transfer Social Social Public Private Income and Leasing P Household (A) Salary Business (3) Benefits Assistance Sources Sources (B) of Land Gift Exchange Other Total Income APER Type (1+2+3) (1) (2) (a+b+c+d) (a) (b) (c) (d) (f+g+h) (f) (g) (h) (C) (A+B+C) Q1 lei 19,817,781 6,811,427 802,348 12,204,006 9,703,371 901,023 1,512,935 86,677 3,087,173 7,357,483 -4,225,193 -45,117 2,341,668 25,246,622 #HHs 482 130 19 463 423 133 220 14 518 515 483 333 214 518 Q2 lei 40,560,608 21,800,000 1,123,121 17,637,488 14,400,000 877,690 2,171,154 188,644 5,979,315 9,015,588 -2,968,139 -68,134 3,237,302 49,777,225 #HHs 511 281 21 487 464 113 234 33 518 518 491 266 144 518 Q3 lei 58,340,592 33,800,000 1,443,353 23,097,239 18,000,000 749,699 3,690,069 657,471 6,735,959 8,914,560 -2,310,112 131,511 3,598,365 68,674,917 #HHs 515 312 23 468 437 96 240 42 518 517 480 262 146 518 Q4 lei 73,047,540 43,800,000 2,180,385 27,067,154 21,000,000 932,212 4,601,375 533,567 9,455,096 11,811,848 -2,479,335 122,583 4,672,021 87,174,658 #HHs 514 301 26 462 425 104 251 41 518 518 484 232 162 518 Q5 lei 135,014,316 67,600,000 24,300,000 43,114,316 22,400,000 1,654,751 15,600,000 3,459,565 22,285,632 19,388,538 2,424,584 472,510 11,957,524 169,257,472 #HHs 513 298 69 448 397 101 289 40 518 518 485 229 166 518 Total lei 65,391,619 34,800,000 5,966,436 24,625,183 17,100,000 1,022,914 5,517,518 984,751 9,500,994 11,290,664 -1,912,200 122,530 5,152,812 80,045,425 #HHs 2,535 1,322 158 2,328 2,146 547 1234 170 2592 2,586 2,425 1322 779 2,592 Q1 % lei 78.5% 26.8% 3.2% 48.3% 38.4% 3.6% 6.0% 0.3% 12.2% 29.1% -16.7% -0.2% 9.3% 100.0% %HHs 93.1% 25.1% 3.7% 89.6% 81.7% 25.7% 42.5% 2.7% 100.0% 99.4% 93.2% 64.3% 41.3% 100.0% Q2 % lei 81.5% 43.8% 2.5% 35.4% 28.9% 1.8% 4.4% 0.4% 12.0% 18.1% -6.0% -0.1% 6.5% 100.0% %HHs 98.6% 54.2% 4.1% 94.0% 89.4% 21.8% 45.2% 6.4% 100.0% 100.0% 94.8% 51.4% 27.8% 100.0% Q3 % lei 85.0% 49.2% 2.1% 33.6% 26.2% 1.1% 5.4% 1.0% 9.8% 13.0% -3.4% 0.2% 5.2% 100.0% %HHs 99.4% 60.2% 4.4% 90.3% 84.4% 18.5% 46.3% 8.1% 100.0% 99.8% 92.7% 50.6% 28.2% 100.0% Q4 % lei 83.8% 50.2% 2.5% 31.0% 24.1% 1.1% 5.3% 0.6% 10.8% 13.5% -2.8% 0.1% 5.4% 100.0% %HHs 99.2% 58.1% 5.0% 89.2% 82.0% 20.1% 48.5% 7.9% 100.0% 100.0% 93.4% 44.8% 31.3% 100.0% Q5 % lei 79.8% 39.9% 14.4% 28.4% 13.2% 1.0% 9.2% 2.0% 13.2% 11.5% 1.4% 0.3% 7.1% 100.0% %HHs 99.0% 57.5% 13.3% 86.5% 76.6% 19.5% 55.8% 7.7% 100.0% 100.0% 93.6% 44.2% 32.0% 100.0% Total % lei 81.7% 43.5% 7.5% 30.8% 21.4% 1.3% 6.9% 1.2% 11.9% 14.1% -2.4% 0.2% 6.4% 100.0% %HHs 97.8% 51.0% 6.1% 89.8% 82.8% 21.1% 47.6% 6.6% 100.0% 99.8% 93.6% 51.0% 30.1% 100.0% Formal Income: salary, income through civil convention/ collaboration contract, independent authorized non/agricultural activities, State old age pension,Veteran or disability pension, CAP pension, scholarships, child benefits, other social payments, income from investments, savings, rent on other properties, income from business profit, formal public and private assistance (such as social allowances, emergency relief, etc.) FormalTransfers: state old pension + veteran pension or disability pension + CAP pension + scholarship + child benefits + other social payments + formal public and private assistance (such as social allowances, emergency relief, etc.) Public Social Benefit: State old age pension,Veteran or disability pension, CAP pension, scholarships, child benefits; Public Social Assistance: social allowances, emergency relief, allowances for the wives of conscripts, subsidies for heating dwellings connected to the public heating system, subsidies for heating by fuel, firewood and/or coal; OtherTransfers from Formal Public Sources: Formal public assistance from the local council, police, prefect's office, National Government, City Hall, Communal administration agency, and public hospitals and schools; subventions for medical assistance (ie surgery); subsidies for agricultural services; subsidized ticket for traveling by rail; subsidized loans for building/ buying a house; Transfers from Formal Private Sources: Formal private assistance from associations such as theVillage/Neighborhood committee and Parents committee, and private schools and hospitals + money from sponsors + donations; Informal Income Total: daily wages, small scale agricultural production, leasing of land, others, net gift and donations, net exchanges of services, payments; Earning from Agriculture and informal daily wages: income from daily work or temporary incomes, income from household agricultural production, yearly self- consumption; Income from Rent and Leasing of Land: income for land rented for use, income for land leased to others; Gift: gift inflow-gift outflow; Net exchange: exchange of similar and different services; Other informal sources: payment inflow, money from relatives who work temporarily in another country, other sources. Source: Public/Private Transfers and Social Capital Survey,World Bank, 2003. Note: In 2002, the average exchange rate was 333,055.40 lei per US dollar. M APPED INO R M APPED O UT ?9 10 WORLD BANK WORKING PAPER Broader access of the elderly to social benefits often turns them into providers for their younger relatives: I have a daughter and a son-in-law, and two nieces, and their income is only 1.6M lei. There are four of them in their family . . . If it wasn't for myself and my wife, and for our pensions, how would they manage? So we, the elderly, choose to help them. Because, thanks be to God, I don't need anything fancy, I have everything I need. But the young people, they are truly in a dire situation. --Low income respondent, Alunis, rural Now my only source of support is my father's pension. There are five of us in our family, and we all live off my father's pension. --Low income respondent, Alunis, rural Social assistance, which includes social allowances, emergency relief, and different heating compensations, constitutes 3.6 per cent of income for the poorest quintile, is available to 25.7 per cent of households from the poorest quintile and is progressive (Table 1). More urban poor households (35.1 per cent) receive social assistance than their rural counterparts (21.8 per cent; see Tables A1a and A1b in Appendix A). For the poorest decile the importance of social assistance is more dramatic--28 per cent of households in this decile receive social assistance. For recipient households in the poorest decile social assistance constitutes 21.3 per cent of total income. In comparison, 23.3 per cent of households from the second decile, receive only 8.4 per cent of total formal income from social assistance. Recipients of social assistance (MIG) consider it to be a vital part of their income, as assistance is received at regular intervals and represents "cash in hand" for cash-strapped households. Focus group respondents indicated that the guaranteed income enabled them to borrow small sums of money or products from neighbors, relatives, and food stores, thereby smoothing consumption in times of hardship: We have neighbors, relatives who can lend some things to us. There are also the elderly who receive pensions, and we sometimes go to them, and they lend us money. When we receive the (child) allocation or social aid, we return the money we borrowed. (. . .) Because if you don't repay your loan, no one will lend you any money in the future. --Low income respondents, Nereju, rural R1: Too little help! We don't really help each other! Only when we come to the store and they give us things. But even here you know you must bring money to pay for these things. R2: We certainly know we must bring the money! R2: And even at the store, when do you know that you can come and buy things? It is only when you know your (social) aid is coming, that you will get some money. --Roma, low income respondents, Alunis, rural At the same time, social assistance recipients and other low income focus group respondents complained about difficulties in accessing public assistance due to four main factors: 1) poor access to information describing the documentation needed to receive aid and various eligibility criteria, 2) the dismissive attitudes of local officials, 3) the high costs for filing documentation, and 4) the inability of poorer localities to cope with their social assistance mandates. Poor access to information, dismissive attitude: There is a new social aid law, and for newborns up to the age of six months you get 750,000 lei [US$22.69]. The newspapers say so. When I went to ask about this, they said they had not heard about it, that I should go talk to Adrian Nastase [Prime Minister of Romania]. --Roma, low income respondents, Foc¸sani, urban MAPPED IN OR MAPPED OUT? 11 Lack of awareness: I have noticed that plenty of these people (the poor, mainly) have almost never made any attempt, or they simply did not know how to apply for social aid from County hall. I know a few examples of individuals who were supposed to receive such benefits. They even told me that they went there, but were not given any help in this respect. So this is the problem. Such people occupy the last position on the social scale, if I may say so. If they were to benefit from social aid, they would implicitly qualify for free medical assistance. A large majority of them did not know anything about this, others had not received any guidance from City Hall, that is they were misinformed. --Physician, Breaza, urban Arbitrariness of local officials: If one owned a horse, for example, or a wagon, they would not give you social aid! If you owned a Persian carpet (i.e., of good quality) in your house they wouldn't give you social aid either. Also, if you own a television set, you don't get any aid! But, one would think that perhaps, a 50-year old person, after 20 or so years of being married, may have been able to accumulate a few things/or, to accomplish something. --Roma, low income respondent, Alunis, urban Costs of accessing services: Last year, they were very disrespectful towards me and my wife. They asked her to go to the notary and certify a personal income statement, which cost 85,000 lei [US$2.57]. The costs for obtaining documentation are very high. --Low income respondents, Galati, urban Inability of poorer localities to cope with social assistance mandates: There are decisions taken by the Government, but they are applied at the local level. They give social help to those people with income below a certain level, for example. The money should come from the local budget, but the local budget doesn't have enough money. They provided social assistants for people with disabilities. These assistants are employees. First they were paid by the Ministry of Labor. After that, they asked the local governments to pay 25 percent. In the next year they asked them to pay 50 percent. Now the local governments must pay 100 percent of the social assistants' salaries. This costs the local government about 3 billion lei [US$90,756.73]. And now we have reached the point where the local government doesn't even have enough money to repair a hole in the road. --Local councilor, Breaza I'm speaking about the local budgets of the villages, which are extremely small. I know villages that can hardly cover their operating costs. Among the material services provided, the Minimum Income Guarantee (MIG) is the most affected, because there are not enough funds. I have no specific data with me, but as far as I know, there were more than twenty thousand demands. These were only partially covered. And even those that were approved, many of them were not paid in full. --Public service provider, Targu Mures Another category of public transfers are payments made by local government (city hall, local council, prefecture, specialized national agencies), and by public service providers (hospitals, schools, kindergartens). These transfers include public assistance for high cost medical emergencies, public medical insurance, and ad hoc assistance for education; railway ticket subsidies for pensioners, veterans, and students; agricultural subsidies; and subsidized loans for the purchase of primary residence. These are important flows that reach 47.6 per cent of the sample (1,234 households; Table 1). Public transfers constitute 6.4 per cent of total income for the poorest quintile; 4.6 per cent for the second quintile; and 10 per cent of total income for the highest income quintile, demonstrating greater importance of these transfers for the incomes of richer households (Table 1). Separating these transfers into assistance from public service providers (assistance with health emergencies, childcare, and education), and other public transfers from local or national 12 WORLD BANK WORKING PAPER TABLE 2: TRANSFERS FROM PUBLIC SERVICE PROVIDING INSTITUTIONS AND FROM PUBLIC ASSISTANCE PROGRAMS, BY QUINTILE Number of Number of Households Receiving Share of All Households Receiving Share of All Transfers from Public Households Transfers from Other Households Service Providers Receiving Public Programs Receiving Quintile 1 98 19.0% 163 16.1% Quintile 2 95 18.4% 188 18.6% Quintile 3 91 17.7% 196 19.3% Quintile 4 107 20.8% 208 20.5% Quintile 5 104 20.2% 258 25.5% Total 515 100.0% 1,013 100.0% Source: Public/Private Transfers and Social Capital Survey,World Bank, 2003. government (subsidized investments, agricultural subsidies, and assistance for transportation) helps discern the following divergent patterns (Table 2 and 2a). Assistance from public service providers is more progressive, and reaches a comparable number of households in different income quintiles, while other public transfers are highly regressive, with more high income households receiving these transfers both in absolute terms and as a share of income. Formal Private Social Flows Formal private networks include associations such as trade unions, church groups, parent committees, neighborhood associations, agricultural associations, professional associations, and NGOs. Overall, active membership in these organizations is fairly high, as 1,302 households, or 49.3 per cent of the sample, report being members of at least one of these groups. Poor households report lower associational membership than more well-to-do households. 33 per cent of households from the poorest quintile report membership in an association compared to 60.5 per cent for the highest income quintile. The highest overall membership is reported for Trade and Labor Unions (29.7 per cent of all associated members), Owners' Associations (24.0 per cent of associated members), and Agricultural Societies (20.5 per cent; Table 3). Of these three, Trade and Labor Unions have the lowest membership among the poorer quintile (around 4 per cent of households) and Agricultural Societies the highest (11.43 per cent of these households). The latter is comparable to membership from the second through fourth quintiles and is 30 per cent higher than membership from the highest income quintile. On average, formal private associations do not seem oriented towards assisting the poor. Both cash and in-kind payments and services are provided to average and higher income households, who are more likely to be their members, and are regressive as a share of household income. The highest income quintile receives 2 per cent of total income from private associations, while the poorest quintile gets only 0.3 per cent of income from these transfers (Table 1). Socially vulnerable groups, such as female-headed households receive a significantly lower number of transfers than non-female headed households. Pensioners do not get significantly more assistance than other household groups. The poor report being isolated from those groups that were previously open to them: Before, people were not layered as such, in these categories. Now the Forest Association also asso- ciates itself only with the rich, and everyone else is excluded. This is how our world is nowadays. --Average income respondents, Nereju, rural TABLE 2A: TRANSFERS FROM PUBLIC SERVICE PROVIDING INSTITUTIONS AND FROM PUBLIC ASSISTANCE PROGRAMS, BY QUINTILE Average Transfers Average from Public As a Share As a Share of Transfers from As a Share As a Share of Service of the Income before Other Public of the Income before Variable Providers (in lei) Transfer theTransfer Programs (in lei) Transfer theTransfer Quintile 1 474,786 9.3% 2.00% 1,038,149 4.6% 4.38% Quintile 2 559,550 10.9% 1.17% 1,611,604 7.2% 3.37% Quintile 3 771,830 15.1% 1.19% 2,918,239 13.0% 4.49% Quintile 4 1,108,184 21.6% 1.34% 3,493,191 15.6% 4.23% Quintile 5 2,332,030 45.5% 1.52% 13,267,970 59.1% 8.67% All households 1,025,157 100% 1.38% 4,492,361 100% 6.04% Source: Public/Private Transfers and Social Capital Survey,World Bank, 2003. M APPED INO R M APPED O UT ?1 3 14 WORLD BANK WORKING PAPER TABLE 3: MEMBERSHIP OF HOUSEHOLD MEMBERS IN ORGANIZATIONS Size of Member Households Organization (as % of the sample) Trade Union or Labor Union 29.7% Owners' association 24.0% Agricultural society with legal personality 20.5% Parents' committee 18.0% Church committee or other forms of collective church coordination 16.5% Political party 15.2% Professional Association 12.4% Family-Type Agricultural Association 10.8% Other Associations 10.3% Artists' /sports association 9.6% Traders or Business Association 8.7% Money rotating system 8.6% NGO or civic group 7.1% Source: Public/Private Transfers and Social Capital Survey,World Bank, 2003. It is very hard! I asked someone I knew if I could borrow his tractor, which I used to bring home some wood for heating. Before, the communa used to give us wood, that was actually the reason why the communa owned the woods. And they used to write down the names of all the poor people in a table, and sell it to them for a reduced price; they used to chop the wood in smaller pieces, measure it in cubic meters, then give it to the poor, so that it would be enough (for everyone) . . . --Low income respondent, Alunis, rural At the same time, the poor are active contributors to private associations--75 per cent of households from the poorest quintile contribute to different public groups, as opposed to 77 percent from the highest income quintile (Table 4). The church, through church groups, and the school, through parent committees, are the largest recipients of contributions (Table A4a in Appendix A). 63 per cent of the sample contributes to the church, while the next biggest recipient--the parent's committee--receives contributions from only 13 per cent of the sample. While richer households are more often represented in church committees, the poor (particularly the rural poor) are the most active contributors to church causes (Table 4b and 4c). The vulnerable groups are equally likely to contribute to church causes (Table 4d). There is no indication that churches distribute more support to vulnerable households (female-headed households and pensioners) than to average households. Furthermore, the poor, specifically those in Roma communities, report high payments for religious rites and little support from local clergy. For the Roma these costs are reportedly aggravated by discrimination. TABLE 4: CONTRIBUTIONS TO PRIVATE ORGANIZATIONS, BY QUINTILE Total Urban Rural As a share As a share As a share Variable Number Mean (Lei) of income Number Mean (Lei) of income Number Mean (Lei) of income Quintile 1 390 706,861 2.8% 93 768,752 2.7% 297 687,480 2.8% Quintile 2 388 783,823 1.5% 176 714,326 1.2% 212 841,518 1.9% Quintile 3 384 824,964 1.2% 219 656,971 0.9% 165 1,047,937 1.6% Quintile 4 390 942,682 1.1% 281 972,354 1.0% 109 866,189 1.1% Quintile 5 397 1,105,023 0.6% 296 1,177,137 0.6% 101 893,677 0.6% All households 1949 873,743 1.0% 1065 903,996 0.9% 884 837,295 1.5% Source: Public/Private Transfers and Social Capital,World Bank, 2003. M APPED INO R M APPED O UT ?1 5 16 WORLD BANK WORKING PAPER TABLE 4B: MEMBERSHIP IN CHURCH COMMITTEES Church Committee or Other Forms of Collective Church Coordination Quintile 1 6.8% Quintile 2 7.6% Quintile 3 8.4% Quintile 4 10.6% Quintile 5 8.5% Source: Public/Private Transfers and Social Capital,World Bank, 2003. TABLE 4C: CONTRIBUTIONS TO CHURCH ACTIVITIES Total Urban Rural Percentage Percentage Percentage Variable # of HHs of quintile # of HHs of quintile # of HHs of quintile Quintile 1 363 68,8% 71 47,0% 292 77,5% Quintile 2 348 66,0% 144 53,9% 204 78,5% Quintile 3 335 63,7% 183 54,5% 152 80,0% Quintile 4 345 65,3% 225 58,8% 120 82,8% Quintile 5 323 61,1% 239 55,7% 84 84,0% All HHs 1,714 65,0% 862 55,0% 852 79,5% Source: Public/Private Transfers and Social Capital,World Bank, 2003. TABLE 4D: CONTRIBUTIONS TO CHURCH COMMITTEES AND ACTIVITIES, BY URBAN/RURAL AND VULNERABILITY Variable Number Percent Variable Number Percent Variable Number Percent Urban 862 55.0 Female head 280 65.7 Pensioner 533 66.2 Rural 852 79.5 Non-female head 1,434 64.8 Non-Pensioner 1181 64.4 Source: Public/Private Transfers and Social Capital,World Bank, 2003. The Church! That's another problem. Well, all the Roma here in the communa are Orthodox. For example, at Easter the priest goes around to everyone's home to sprinkle their house with holy water. I owe the priest some money, and was not able to pay him back. The holidays came and went . . . and the priest did not stop by at all! He went to the neighboring houses, and he did not even bother to stop by to ask me how I was doing, or if I wanted him to bless my house.(. . . )If you have money, you pay the priest, if you don't, he doesn't stop by, he doesn't care about you. --Roma, low income respondents, Alunis, urban We are discriminated against from all sides. All the local leaders discriminate against us. My little girl was sick and I asked the priest to please baptize her. He said, until you make your payment, I won't baptize her! --Roma, low income respondents, Alunis, urban MAPPED IN OR MAPPED OUT? 17 TABLE 5: FLOWS FROM PRIVATE BUSINESSES AND PRIVATE SERVICE PROVIDERS Transfers from Transfers from Private Businesses Private Service Providers As a share As a share Variable N Mean (lei) of income N Mean (lei) of income Q1 14 86,677 0.30% 0 0 0.00% Q2 28 175,353 0.40% 7 13,291 0.03% Q3 38 584,563 0.90% 11 72,908 0.11% Q4 31 521,567 0.60% 3 12,000 0.01% Q5 33 3,390,530 2.00% 7 69,035 0.04% Total 144 956,829 1.20% 28 27,922 0.03% Source: Public/Private Transfers and Social Capital Survey,World Bank, 2003. Formal Private Organizations Both private service providers and private institutional economic actors provide some assistance to a closed group of employees, clients, and associates. These transfers are also highly regressive, with the highest income quintile receiving more assistance from formal private institutional actors-- most likely their employers--as well as from private service providers (Table 5). Philanthropic flows do not register as significant in this sample. To conclude, official public flows form a very important source of income for poorer households, the most important being social benefits and targeted social assistance. Disturbingly, testimonials single out the high cost of accessing social assistance in some localities, the arbitrary nature of resource allocation by local officials, the inability of poorer localities to fund the local share of expenses, and discrimination against the Roma by leaders and elite groups of the community (for a more detailed multivariate analysis of social and fiscal determinants of MIG flows see chapter 5). At the same time, it is important to note that other public flows are not pro- poor by nature. Formal private flows are highly regressive, pointing to the closed non-altruistic nature of the newly formed interest groups and associations. At present, the poor do not benefit from non-government-sponsored formal transfers, which makes them even more dependent on the state for assistance. Informal Income Informal income is vital for both urban and rural poor households. These flows include: 1) earnings from informal wages, small scale agricultural production and leasing of land; 2) inter- household gift giving; and 3) exchanges.6 All households in the sample participate in some type of informal transactions. 12.2 per cent of total income in the poorest quintile comes from informal sources. The lowest share of informal income is 9.8 per cent for quintile 3, and the highest share is 13.2 per cent for the highest income quintile (Table 1). Patterns of formal and informal flows differ for rural and urban populations. The rural population receives more than one third of its total income from informal wages, small scale 6. Since there is no prior tradition of netting out payments in income calculations, informal payments in Table 1 are included as payment inflows and added to "other sources of income." For a more detailed analy- sis of informal payments see Chapter 3 on inter-household transfers. 18 WORLD BANK WORKING PAPER agricultural production, and land leasing, while the share of these items is only 16.2 per cent for the urban poor (Table A1a and A1b, Appendix A). Small scale private plot production allows the rural poor to feed their families from own agricultural production and to sell this produce at local markets. Agricultural seasonal work is also an important source of income for rural landless households. In urban areas, service day jobs are reported to be important for the survival of poor households, though the poor--the poor Roma in particular--report that it is increasingly difficult to find odd jobs (cleaning, carpentry, etc.) in towns, partly because of the decrease in solidarity within ethnic groups and networks of relatives: Low wages for odd service jobs We work a full day for only 20,000 lei [US$0.60]. It is very difficult today to raise three children. They (the relatives) all have their own companies, but they will not hire us. --Female, low income respondent, Breaza, urban Seeds are the major source of income. We sell seeds. We wash, whitewash; I have sometimes earned 35,000 [US$1.06] a day, and could not do anything with this money . . . Seasonal work . . . And this if we find offers for such jobs. When Easter comes, we work (. . .) We work wherever we are offered jobs. I know old acquaintances who offer me jobs typically for one day only. We also find out about other jobs from newspapers. --Roma, low income respondent, Foc¸sani, urban Both the household level survey and focus group testimonials demonstrate that it is easier to get ad hoc informal jobs in rural areas. There is evidence of self-organization of the poor in teams of day laborers: Those who are poor, who lack any assets, they have a hard time making ends meet. They make a living by working as day laborers, mainly in agriculture. They may also raise animals. Sometimes they form teams and go throughout the countryside looking for work (in agriculture, on the fields). They don't earn a lot of money. They typically come back with agricultural produce such as corn or money. Enough to cover some basic life necessities, but nothing more. --President of Nereju Community Organization, Nereju, rural Participants of poor Roma focus groups singled out summer agricultural employment as a particularly vital source of income: Everyone, everyone goes to work for food, as day laborers. We find employment, day by day, but not now, only in the summertime . . . In the wintertime you die of starvation. In the summertime, you can manage. The best time period for the Roma here is in the summer, when you can breathe a little, when we go to Gheorgheni and pick blueberries and raspberries . . . --Low income respondents, Alunis, rural Because the study is more focused on formal and informal social transfers and social solidarity within open and closed networks, we do not concentrate on incomes sources from informal employment, and instead will turn to informal inter-household transfers. CHAPTER 3 INFORMAL INTER-HOUSEHOLD FLOWS T he next informal source of income in importance is net informal inter-household transfers. These include: 1) altruistic gifts presented to and received from other households, and 2) exchanges of goods and services between households. In total household income net gifts (inflows minus outflows) are negative for all categories of households but the richest quintile. Net exchanges are also negative for poor rural households and for the second quintile of urban households (Table A1a and A1b in Appendix A). We now analyze informal flows in more detail, in order to: 1) assess the role of informal incomes in the livelihoods of poor households; 2) determine the likelihood of receiving and transferring resources to other households; and 3) construct a map that relates the nature and geography of informal transfers to household income, characteristics, and social environment. Informal Inter-household Flows by Category Informal flows are found to be substantial and widespread. Households in all income categories participate extensively in informal inter-household transfers (almost 97 per cent of all sampled households). Flows among households are significant when measured as a fraction of household income before inter-household transfers. Gross informal outflows equal 12.3 per cent and gross informal inflows equal 8.5 per cent of net income before inter-household transfers. Not surprisingly, these shares are higher for inflows and outflows for the poorest quintile, 17.8 and 17.6 per cent respectively. If we compare these income shares to MIG-related transfers, we will see that informal gift-giving flows in absolute terms are 5 times greater than MIG-related transfers! This comparison brings out again the importance of informal flows in the livelihoods of Romanian households in general and poor households in particular. 19 20 WORLD BANK WORKING PAPER TABLE 6A: TOTAL INTER-HOUSEHOLD TRANSACTIONS OUTFLOWS (IN LEI AND PERCENTAGES) Income before Inter-household Inter-household Quintile Transaction Gift Payment Exchange Transaction Q1 4,900,463 2,834,802 1,122,035 943,626 27,600,000 Q2 7,067,152 4,738,569 1,677,287 651,296 52,400,000 Q3 7,673,685 5,180,584 1,912,508 580,593 71,000,000 Q4 10,351,711 6,829,662 2,737,056 784,993 88,300,000 Q5 20,368,958 13,300,000 5,612,488 1,456,470 170,000,000 All HHs 10,070,846 6,575,175 2,612,275 883,396 81,900,000 As a Share ofTotal Inter-householdTransactions Q1 100% 57.8% 22.9% 19.3% Q2 100% 67.1% 23.7% 9.2% Q3 100% 67.5% 24.9% 7.6% Q4 100% 66.0% 26.4% 7.6% Q5 100% 65.3% 27.6% 7.2% All HHs 100% 65.3% 25.9% 8.8% As a Share of a Particular Inter-householdTransaction, by Quintile Q1 9.7% 8.6% 8.6% 21.4% 6.7% Q2 14.0% 14.4% 12.8% 14.7% 12.8% Q3 15.2% 15.8% 14.6% 13.1% 17.3% Q4 20.6% 20.8% 21.0% 17.8% 21.6% Q5 40.5% 40.5% 43.0% 33.0% 41.5% All HHs 100.0% 100.0% 100.0% 100.0% 100.0% As a Share ofTotal Income before a Particular Inter-householdTransaction Q1 17.8% 10.3% 4.1% 3.4% Q2 13.5% 9.0% 3.2% 1.2% Q3 10.8% 7.3% 2.7% 0.8% Q4 11.7% 7.7% 3.1% 0.9% Q5 12.0% 7.8% 3.3% 0.9% All HHs 12.3% 8.0% 3.2% 1.1% Source: Public/Private Transfers and Social Capital,World Bank, 2003. Gross transfers sent are about one third higher than the transfers received. This trend has already been noted among poor households in Romania in a study of extreme poverty.7 The reason may be, as is borne by the data, that respondents recall the smallest gifts and loans extended to other households (the average value of outflows is smaller than the average value of inflows), and only the few and more significant contributions they have received themselves (the frequency of inflows is lower than the frequency of outflows). Similar perceptions were captured in focus group testimonials: The neighbors won't help me anymore, everybody minds his own business. If I ask for a cabbage he says that he doesn't have any. If anybody were to ask me for anything, I would give it to them for free. --Low income person, Breaza, urban 7. "It is a proven fact that the poor underestimate the help they receive and overestimate the help they offer'' (Stanculescu and Berevoescu, forthcoming). MAPPED IN OR MAPPED OUT? 21 TABLE 6B: TOTAL INTER-HOUSEHOLD TRANSACTIONS INFLOWS (IN LEI AND PERCENTAGES) Income before Inter-household Inter-household Quintile Transaction Gift Payment Exchange Transaction Q1 4,860,970 2,382,542 1,426,012 1,052,416 27,600,000 Q2 4,879,986 3,032,865 1,108,693 738,428 52,400,000 Q3 5,443,322 3,189,966 1,428,305 825,051 71,000,000 Q4 7,276,531 5,194,846 1,119,909 961,776 88,300,000 Q5 12,315,270 9,108,721 1,754,592 1,451,957 170,000,000 All HHs 6,955,216 4,581,788 1,367,502 1,005,926 81,900,000 As a Share ofTotal Inter-householdTransactions Q1 100% 49.0% 29.3% 21.7% Q2 100% 62.1% 22.7% 15.1% Q3 100% 58.6% 26.2% 15.2% Q4 100% 71.4% 15.4% 13.2% Q5 100% 74.0% 14.2% 11.8% All HHs 100% 65.9% 19.7% 14.5% As a Share of a Particular Inter-householdTransaction, by Quintile Q1 14.0% 10.4% 20.9% 20.9% 6.7% Q2 14.0% 13.2% 16.2% 14.7% 12.8% Q3 15.7% 13.9% 20.9% 16.4% 17.3% Q4 20.9% 22.7% 16.4% 19.1% 21.6% Q5 35.4% 39.8% 25.7% 28.9% 41.5% All HHs 100.0% 100.0% 100.0% 100.0% 100.0% As a Share ofTotal Income before a Particular Inter-householdTransaction Q1 17.6% 8.6% 5.2% 3.8% Q2 9.3% 5.8% 2.1% 1.4% Q3 7.7% 4.5% 2.0% 1.2% Q4 8.2% 5.9% 1.3% 1.1% Q5 7.2% 5.4% 1.0% 0.9% All HHs 8.5% 5.6% 1.7% 1.2% Source: Public/Private Transfers and Social Capital,World Bank, 2003. Another outstanding feature of this study is that the net effect of inter-household transfers is income neutral (Table 7). The results are similar for urban and rural households, and are not reported here. The finding that inter-household transfers are income neutral runs counter to the results reported in related literature where inter-household transfers behave like means-tested public transfers and flow from the rich to the poor (Cox etal. 1996, Jimenez etal. 2001, Cox 2002). This outcome can be attributed to the more detailed nature of inter-household transactions mentioned above as well as to the particular configuration of interactions among households in post-socialist countries in general and in Romania in particular. It is also consistent with sociologists' findings on patterns of informal transactions in post-Socialist countries. Social ties are found to be built over time, to depend upon trust, and to require maintenance. The poor lack these resourcesand are often excluded (Pahl 1988, Morris and Irwin 1992). The situation seems to be exacerbated by post-Socialist dislocation on the one hand, in which old personal ties are strained 22 WORLD BANK WORKING PAPER TABLE 7: INTER-HOUSEHOLD TRANSFERS AND INEQUALITY (IN LEI AND PERCENTAGES) Income before Income after Inter-household Inter-household Variable Transfer Share Transfer Share Decile 1 19,800,000 2.4% 19,300,000 2.4% Decile 2 35,300,000 4.3% 34,900,000 4.4% Decile 3 49,200,000 6.0% 47,300,000 5.9% Decile 4 55,600,000 6.8% 54,100,000 6.8% Decile 5 70,600,000 8.6% 68,400,000 8.6% Decile 6 71,300,000 8.7% 69,500,000 8.7% Decile 7 85,000,000 10.4% 82,600,000 10.3% Decile 8 91,500,000 11.2% 90,600,000 11.3% Decile 9 114,000,000 13.9% 113,000,000 14.1% Decile 10 226,000,000 27.6% 219,000,000 27.4% Quintile 1 27,550,000 6.7% 27,100,000 6.8% Quintile 2 52,400,000 12.8% 50,700,000 12.7% Quintile 3 70,950,000 17.3% 68,950,000 17.3% Quintile 4 88,250,000 21.6% 86,800,000 21.6% Quintile 5 170,000,000 41.5% 166,000,000 41.5% Source: Public/Private Transfers and Social Capital,World Bank, 2003. by newly-developed income inequality. On the other hand, functional informal ties based on the ability to obtain things in a shortage economy have been rendered useless by the advent of the market economy (Wedel 1986, Ledeneva 1998). Focus group testimonials help identify some particular characteristics of informal outflows from poorer households. These are: 1) the disproportionate transfers to children made by poor rural parents in the form of agricultural produce or income from selling agricultural output produced on small plots, and 2) the high price paid by the poor for remaining in reciprocal networks. Transfers to children: My daughter is in college. I raise a pig for them, every month I give them 40­50 eggs, I give them 500,000 ­ 1M lei because I feel pity for them. --Average income respondent, Alunis, rural High cost of remaining in networks: If you cannot rise up to a certain level, you are pushed aside. Q: What does it mean, "to be pushed aside?" You cannot access their circles. They have many cars, and they have a lot of money. --Average income respondents, Alunis, urban On the positive side, while summarily informal transactions are income neutral, some types of inter-household transactions appear progressive (Table 8).8 The most popular form of transaction is gift giving with 93.6 per cent of households exchanging gifts. Gift giving transactions are the highest in value among all inter-household transfers and are mildly progressive. Rural poor households perceive themselves as net givers, while urban poor households see themselves as net receivers of gifts. This pattern is consistent with the 8. For the definition of progressive/regressive transactions, see footnote 3. MAPPED IN OR MAPPED OUT? 23 TABLE 8: NET INFORMAL INTER-HOUSEHOLD TRANSACTIONS, BY CATEGORY Net Informal Total Income before Inter-household Inter-household HouseholdType Transactions Gift Payment Exchanges Transactions Q1 lei -39,493 -452,260 303,977 108,790 27,600,000 # of HHs 504 482 338 325 518 Q2 lei -2,243,663 -1,705,705 -568,594 87,133 52,400,000 # of HHs 506 492 288 272 518 Q3 lei -2,391,444 -1,990,617 -484,204 244,458 71,000,000 # of HHs 496 481 273 247 518 Q4 lei -3,084,466 -1,634,816 -1,617,147 176,783 88,300,000 # of HHs 498 484 244 242 518 Q5 lei -8,070,967 -4,183,539 -3,857,896 -4,513 170,000,000 # of HHs 498 484 266 234 518 All HHs lei -3,164,701 -1,993,387 -1,244,773 122,530 81,900,000 # of HHs 2,502 2,423 1,409 1,320 2590 As a Share of each Inter-householdTransactions Q1 % lei 0.2% 4.5% -4.9% 17.8% 6.7% % of HHs 20.1% 19.9% 24.0% 25.5% 20.0% Q2 % lei 14.2% 17.1% 9.1% 14.2% 12.8% % of HHs 20.2% 20.3% 20.4% 20.1% 20.0% Q3 % lei 15.1% 20.0% 7.8% 39.9% 17.3% % of HHs 19.8% 19.9% 19.4% 19.8% 20.0% Q4 % lei 19.5% 16.4% 26.0% 28.9% 21.6% % of HHs 19.9% 20.0% 17.3% 17.6% 20.0% Q5 % lei 51.0% 42.0% 62.0% -0.7% 41.5% % of HHs 19.9% 20.0% 18.9% 17.3% 20.0% All HHs % lei 100% 100% 100% 100% 100% % of HHs 100% 100% 100% 100% 100% As a Share ofTotal Income before a Particular Inter-householdTransactions Q1 % lei -0.1% -1.6% 1.1% 0.4% 100% % of HHs 97.3% 93.1% 65.3% 62.7% 100% Q2 % lei -4.3% -3.3% -1.1% 0.2% 100% % of HHs 97.7% 95.0% 55.6% 52.5% 100% Q3 % lei -3.4% -2.8% -0.7% 0.3% 100% % of HHs 95.8% 92.9% 52.7% 47.7% 100% Q4 % lei -3.5% -1.9% -1.8% 0.2% 100% % of HHs 96.1% 93.4% 47.1% 46.7% 100% Q5 % lei -4.7% -2.5% -2.3% 0.0% 100% % of HHs 96.1% 93.4% 51.4% 45.2% 100% All HHs % lei -3.9% -2.4% -1.5% 0.1% 100% % of HHs 96.6% 93.6% 54.4% 51.0% 100% Source: Public/Private Transfers and Social Capital,World Bank, 2003. 24 WORLD BANK WORKING PAPER TABLE 8C: NET INFORMAL LENDING As a Share of Inter- As a Share ofTotal Income MeanValue of householdTransactions Before a Particular HouseholdType Transactions by Quintile Inter-householdTransactions Q1 lei -169,044 15.2% -0.6% # of HHs 263 19.2% 50.8% Q2 lei -142,819 12.9% -0.3% # of HHs 275 20.1% 53.1% Q3 lei 255,463 -23.0% 0.4% # of HHs 260 19.0% 50.2% Q4 lei -323,543 29.1% -0.4% # of HHs 276 20.2% 53.3% Q5 lei -730,726 65.8% -0.4% # of HHs 294 21.5% 56.8% All HHs lei -222,134 100% -0.3% # of HHs 1368 100% 52.8% Source: Public/Private Transfers and Social Capital,World Bank, 2003. TABLE 8D: NET INFORMAL LENDING (OUTFLOWS AND INFLOWS) (IN LEI PERCENTAGES) Outflows Inflows As a Share of As a Share of As a Share of As a Share of Inter-household Income before Inter-household Income before Loan Transaction by Inter-household Transaction by Inter-household Quintile Amount Quintile Transaction Loan Quintile Transaction Q1 925,222 7.1% 3.4% 756,178 6.4% 2.7% Q2 1,486,873 11.5% 2.8% 1,344,054 11.3% 2.6% Q3 1,478,861 11.4% 2.1% 1,734,324 14.6% 2.4% Q4 2,301,255 17.8% 2.6% 1,977,712 16.7% 2.2% Q5 6,764,799 52.2% 4.0% 6,034,073 50.9% 3.5% All HHs 2,591,402 100.0% 3.2% 2,369,268 100.0% 2.9% Source: Public/Private Transfers and Social Capital Survey,World Bank, 2003. observation about gifts of agricultural produce and pensions received from rural family members (Table A1a and A2b in Appendix A). Cash payments for minor services rendered to other households are the second most important transactions in terms of mean value per household and the number of transacting households (54 per cent of households participating). Rural households are more active in these transactions (on average 73 versus 46 per cent respectively, Table 8A and 8B, Appendix A). The rural poor perceive themselves as net winners, while all urban and richer rural households see themselves giving up more resources than they receive. Payments as a share of income before inter-household transfers are mildly progressive as well. MAPPED IN OR MAPPED OUT? 25 Exchanges of goods and services are more widespread in rural areas, where cash transactions seem to come at a premium--67 percent of rural versus 40 percent of urban sub-samples (Table A8a and A8b, Appendix A). These exchanges are highly progressive, with both the rural and the urban poor seeing themselves as net winners from these transactions. There are more rural poor households participating in inter-household payments and exchanges than urban poor households. This pattern may reflect closer relationships among neighbors in rural areas, exchanges of foodstuffs for consumption, and payments for minor agricultural services (Table A8a and A8b, Appendix A). Surprisingly, informal lending is found to be regressive. More households from the highest income quintile in rural areas borrow informally than those from the lowest quintile (the opposite is true of urban areas). This finding is backed by statements made during focus group sessions indicating that the poor fear indebtedness and prefer to do without rather than borrow: I have nobody to help me, my husband works as well, I have to have milk every day. You can bor- row money from a neighbor, but it's quite a shame to ask a second time. I can buy from the kiosk on credit, the owner knows me, they don't help everybody, she understands that I don't have money. --Low income respondent, Galati, urban I can barely make ends meet financially. I hardly even have enough money to buy medicine. I have nobody to help me. I don't dare go and buy on credit, I try to face up to the situation according to my possibilities. --Low income respondent, Galati, urban Generally, you do not borrow. It is better to give up things. --Low income respondent, Alunis, rural This may be attributed, on the one hand, to the lack of tradition of professional informal lending in post-Socialist countries, and on the other, to traditional reliance on the state for assistance. The poor, particularly the rural poor, lend more than borrow, which may partly be attributed to the desire to stay in informal networks even if such membership comes at a cost. At the same time, participation in informal lending is fairly high. Half of all poor households participate in informal lending. Taken separately, informal outflows and inflows equal approximately 4 per cent of total income for poor urban households and 3 and 3.1 per cent respectively for rural households (Table A8e and A8f, Appendix A). These values are comparable to the value of MIG-related transfers. As a share of income, negative balance for the year is fairly small (0.6 per cent of total income) and may represent part of a dynamic borrowing and repayment pattern (Table A8f in Appendix A). These appear to be consumption-smoothing, short- term loans leveraged against in-coming MIG or other public transfers that come with predictable periodicity. Therefore, lending appears an important coping strategy for poor households and part of a consumption-smoothing, risk-sharing exercise. Maps of Inter-household Transfers To better understand the current paradigm of exchanges among households, we examine its components: Channels of exchanges--relationship among transacting households (relative, friend, and other associate). Modality of transactions--altruistic vs. reciprocal exchanges. Form of transactions--cash vs. in-kind. Geography of exchanges--distance of transactions, the same location vs. other urban/rural localities in Romania or abroad. The frequency and variety of informal transfers are much greater for richer households than for poorer households and the geography of inter-household connections is much more extended. 26 WORLD BANK WORKING PAPER TABLE 9: AVERAGE NUMBER OF TRANSACTIONS PER HOUSEHOLD, BY RELATIONSHIP AllType ofTransfers Relatives Friends Neighbors Somebody Else Total From HH Very poor (0-4 USD) 2.0 0.7 2.4 1.6 6.7 Poor (4.1-8 USD) 2.3 0.7 2.0 1.7 6.8 Average (8.1-16 USD) 2.7 1.0 1.6 1.8 7.1 Rich (16.1+) 3.5 1.4 1.4 2.0 8.2 Total 2.6 1.0 1.8 1.8 7.2 To HH Very poor (0-4 USD) 1.3 0.4 1.4 0.8 3.9 Poor (4.1-8 USD) 1.5 0.5 1.0 0.9 4.0 Average (8.1-16 USD) 1.8 0.7 0.9 1.0 4.3 Rich (16.1+) 2.3 0.9 0.7 1.3 5.2 Total 1.7 0.6 1.0 1.0 4.3 Source: Public/Private Transfers and Social Capital,World Bank, 2003. Richer households operating in the cash economy carry out more informal transactions in cash. Poorer households conduct more exchanges in goods and services. Channels and Forms of Informal Transactions--Prohibitive Cost of Friendship Channels and forms of informal transfers differ dramatically between high income and low income households. Poor households transact primarily with their neighbors, people likely to be in a similar situation, or with providers of odd jobs. These exchanges are predominantly reciprocal, rather than altruistic. The richer households can "afford friendship" with more informal transactions carried out between friends, and more transactions defined as gifts. (Table 9, Figure 1a and 1b). Households from the poorest income group (from $0­$4 in ppp terms per equivalent adult) transact much less with relatives, both in terms of frequency of exchanges and in total volume of FIGURE 1A: AVERAGE NUMBER OF TRANSACTION CASES FOR ALL INTERHOUSEHOLD TRANSFERS BY TYPE OF RELATIONSHIP (FROM HH) 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Relatives Friends Neighbors Somebody else Very poor (0­4 USD) Rich (16.1+) Source: Public/Private Transfers and Social Capital Survey,World Bank, 2003. MAPPED IN OR MAPPED OUT? 27 FIGURE 1B: AVERAGE NUMBER OF TRANSACTION CASES FOR ALL INTERHOUSEHOLD TRANSFERS BY TYPE OF RELATIONSHIP (TO HH) 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Relatives Friends Neighbors Somebody else Very poor (0­4 USD) Rich (16.1+) Source: Public/Private Transfers and Social Capital Survey,World Bank, 2003. transactions, than richer households (Table 10). Poor households average two giving transactions with relatives per year as opposed to an average of 3.5 giving transactions for high income households. The same pattern is observed for receiving transactions­the poor receive an average of 1.3 gifts per year from relatives compared to an average of 2.3 gifts from relatives to high income households. Exchanges with friends are twice as numerous for high-income households than for the poor. The most likely partner in informal exchanges for the poor are their neighbors. The poor record 40 per cent more giving transactions with neighbors than the high income households and twice as many receiving transactions. Another likely partner for the poor is an associate, which can be explained by the fact that the dominant transaction for the poor is through exchange, rather than altruistic gift giving, as is the case for richer households (Table 10). To go and ask from the rich . . . no, we don't do that. We go to the poor. When you are poor, you only go to those who are poor, when you are rich, you go to those who are rich. For if you were to go and ask for help from the rich, they will only laugh at you. -- Low income respondents, Nereju, rural The Roma poor report isolation within their neighborhoods: . . . There are a few (Roma) families round here, on the street that goes up . . . We are like isolated mountains, I swear. We have no water, no roads, we have young children . . . The neighbors won't let us get water from their wells. --Roma focus group, Aluni¸s . . . and high levels of mutual assistance among poor Roma: The people in the ghetto help each other. We all rush to help each other. The kids do the same. We don't go to everyone. We know some people. In the end, it is the poor that help each other. --Roma focus group, Foc¸sani The poor are much less involved in altruistic exchanges than high income households, but are more involved in gift giving with others (neighbors, other associates)--people in their immediate environment. 28 W ORLD B ANK W TABLE 10: THE STRUCTURE OF INTER-HOUSEHOLD TRANSACTIONS, BY TYPE OF TRANSACTIONS (% OF TOTAL TRANSACTIONS) ORKING Gift or Donations Relatives Friends Neighbors Somebody Else Total P APER Household Eeconomic Status From HH To HH From HH To HH From HH To HH From HH To HH From HH To HH Very poor (0­4 USD) 37% 53% 8% 7% 28% 27% 28% 13% 100% 100% Poor (4,1­8 USD) 39% 62% 9% 11% 25% 17% 27% 11% 100% 100% Average (8,1­16 USD) 42% 62% 12% 14% 20% 14% 27% 10% 100% 100% High Income (16,1+) 47% 61% 15% 18% 15% 11% 25% 11% 100% 100% Total 42% 60% 12% 15% 20% 15% 26% 10% 100% 100% Loan, Exchange or Payment Relatives Friends Neighbors Somebody Else Total Household Economic Status From HH To HH From HH To HH From HH To HH From HH To HH From HH To HH Very poor (0­4 USD) 25% 24% 11% 10% 45% 39% 20% 28% 100% 100% Poor (4,1­8 USD) 29% 17% 11% 13% 40% 36% 20% 33% 100% 100% Average (8,1­16 USD) 27% 19% 20% 16% 31% 27% 21% 38% 100% 100% High Income (16,1+) 27% 18% 25% 17% 27% 19% 22% 44% 100% 100% Total 28% 16% 17% 15% 34% 31% 20% 37% 100% 100% Source: Public/Private Transfers and Social Capital Survey, World Bank, 2003. MAPPED IN OR MAPPED OUT? 29 Th e poor testify to isolation from old friends and to inability to sustain old contacts: Relationships have, yes, cooled off among people, because of the differences between . . . how should I phrase this, differences in financial means between people. We had some friends who started their own business . . . now they are doing a lot better than we are, and the relationships between us have cooled off, because you feel at some point that you cannot `float' at the same level with them, and then you try to contact them less often. They see life differently, it is easier for them to make ends meet . . . that's why we cooled it off. --Average income respondent, Breaza, urban Today's poor are in such terrible shape. (. . .) Because those who are poor today were our friends from yesterday, they are the ones who lived next door to us. They are also their (our former neigh- bors') children. And these are all relatively educated people. (. . .) They are faced with terribly embarrassing and humiliating circumstances. They cannot pay their bills. (. . .) Some find under- standing (from people, institutions), others do not. --Average income respondents, Focsani, urban If you had money you would be everybody's friend, because then you could help everybody. But if I don't have money I cannot even step outside my house. I had friends and I helped them. But now, when they see that I can't work and I can't earn money they don't want to know about it, they don't want to hear anything or see anything. . . . I cannot go and borrow money from a for- mer colleague, whom I used to help before . . . he won't help me, he will say that he is unable to help me, that he can't give me anything. --Average income residents, Alunis, rural The rural poor testify to the breakdown of traditional ties of cooperation and traditions of assistance to the poor within communities: During Communism people helped each other more. When something happened to Mr. Ion, everyone would jump to his help. Now if something were to happen to him, everyone says, `Let him manage himself'. --Focus Group average residents Nereju, rural Parents and Children There are more exchanges between parents and children for households in the higher income group than in poor households. There may be three reasons for this pattern. First, higher income people can afford more altruistic exchanges. Second, there are more multigenerational households in poorer income groups. Third, deep poverty is often associated with social rifts and strain of familial ties (Table 11). As a coping mechanism, poor parents report supporting their adult children from pensions and revenue from agricultural plot production, while children report assisting parents with seasonal agricultural activities: My father takes care of me instead of me taking care of him. As soon as he receives his pension, he turns around and lends me money. --Low income respondent, Breaza, urban He [son] comes home on Saturdays, every other week. In the fall, he comes to help harvest pota- toes. And I am forced to slaughter a pig every year, because with only one public teacher's salary, you know how these salaries are (. . .). --Average income respondent, Alunis, rural Cash at a Premium The poorer households carry out a higher share of transactions in services and in-kind. Poor households conduct one third of their transactions in cash compared to about half of transactions 30 WORLD BANK WORKING PAPER TABLE 11: THE AVERAGE NUMBER OF EXCHANGES PER HOUSEHOLD AMONG RELATIVES AllTypes of Transfers Parents Children Brother/Sister Other Relatives HouseholdType # of HH From HH To HH From HH To HH From HH To HH From HH To HH very poor (0-4) 368 hh 0.5 0.4 0.3 0.2 0.3 0.2 1 0.5 poor (4.1-8) 727 hh 0.4 0.3 0.4 0.4 0.4 0.3 1.1 0.5 average (8.1-16) 983 hh 0.6 0.4 0.5 0.5 0.4 0.3 1.2 0.6 high income (16.1+) 514 hh 0.9 0.7 0.5 0.6 0.6 0.4 1.5 0.7 Total 2592 hh 0.6 0.4 0.4 0.5 0.4 0.3 1.2 0.6 Source: Public/Private Transfers and Social Capital Survey,World Bank, 2003. for the high-income groups. The poor households also give and receive more services than do high income households (Table 12, Figure 2a and 2b). It is more difficult for poorer households to participate in cash transactions, as cash transactions require participation in a monetized economy. The increased share of cash transactions is perceived by the poor, particularly the rural poor, as a breakdown of traditions of trust and reciprocity: Now everybody is asking for money and it's not like it use to be. In the past you would bring two jars and two bottles for the school fund and it was enough. Now you have to pay hundreds of thousands of lei. I don't have any children of my own who are in school, but I know it is very dif- ficult. My granddaughter is in school . . . My daughter is unemployed, and she is struggling to keep her children in school. --Female, low income respondents, Galati, urban In the past, this is how things would happen. People had their animals, and they would go to their relatives and say, `Brother-in-law, let me come and help you . . .' He did not want any money for the help offered . . . Or one would offer a free liter of milk, but now if you don't pay, no one gives you any milk! Back then, for example, my cow calved and so she had a lot of milk. Let's say that FIGURE 2A: INTERHOUSEHOLD TRANSFERS BY INCOME CATEGORY AND FORM OF TRANSACTION (FROM HH) 60% 50% Very poor 40% (0­4 USD) 30% Poor (4,1­8 USD) 20% Average (8, 10% 1­16 USD) Rich (16,1+) 0% Cash Produce Services Note: In 2002, the average exchange rate was 33,055.40 lei per US dollar. Source: Public/Private Transfers and Social Capital Survey,World Bank, 2003. MAPPED IN OR MAPPED OUT? 31 FIGURE 2B: INTERHOUSEHOLD TRANSFERS BY INCOME CATEGORY AND FORM OF TRANSACTION (TO HH) 60% 50% Very poor 40% (0­4 USD) 30% Poor (4,1­8 USD) 20% Average (8, 10% 1­16 USD) Rich (16,1+) 0% Cash Produce Produce Source: Public/Private Transfers and Social Capital Survey,World Bank, 2003. would give birth, with calved was gestating also. Well, until your cow would give birth, I would give you milk for free for as long as you needed, and then, later you would give me milk when I had no milk of my own. Now you have to pay for everything upfront. This willingness to help oth- ers has eroded . . . this love for other human beings is . . . well, it is no longer as it used to be. --Male, low income respondent, Alunis, rural The poor in urban areas report a high monetization of exchanges, even at a very basic level of assistance among neighbors: One of my neighbors, who lives in this apartment building, helped me move my bed and I gave her 25,000 lei [US$0.75]. She also helps me sometimes, because she has a gas stove and she lets me cook my food on it. I don't have a gas stove, or a gas heating unit, I don't have anything, not even electricity. [. . .] This neighbor also cooks for me sometimes, because my legs hurt and I can- not climb the stairs up to her apartment. She cooks for me, and I give her money out of my pen- sion, and so she helps me. --Female pensioner, low income respondent, Galati, urban TABLE 12: INTER-HOUSEHOLD TRANSFERS DEPENDING ON THE HOUSEHOLD ECONOMIC STATUS AND THE FORM OF TRANSACTION (CASH, PRODUCE, SERVICE) HouseholdType Cash Produce Services Total From HH Very poor (0-4 USD) 30% 25% 45% 100% Poor (4,1-8 USD) 34% 25% 40% 100% Average (8,1-16 USD) 37% 25% 38% 100% High income (16,1+) 48% 21% 30% 100% Total 41% 24% 35% 100% To HH Very poor (0-4 USD) 33% 36% 31% 100% Poor (4,1-8 USD) 42% 32% 26% 100% Average (8,1-16 USD) 46% 33% 21% 100% High income (16,1+) 58% 30% 11% 100% Total 51% 32% 17% 100% Source: Public/Private Transfers and Social Capital Survey,World Bank, 2003. 32 TABLE 13: THE STRUCTURE OF INTER-HOUSEHOLD TRANSACTIONS DEPENDING ON THE HOUSEHOLD W ORLD AllTypes ofTransfers Same Locality AnotherVillage Another City Abroad Total Household Economic Status From HH To HH From HH To HH From HH To HH From HH To HH From HH To HH B ANK Very poor (0-4 USD) 82% 83% 14% 8% 4% 8% 0% 1% 100% 100% W Poor (4,1-8 USD) 78% 78% 14% 10% 8% 11% 0% 1% 100% 100% ORKING Average (8,1-16 USD) 77% 77% 14% 11% 9% 10% 0% 2% 100% 100% High income (16,1+) 70% 70% 16% 12% 14% 14% 0% 4% 100% 100% Total 76% 77% 15% 11% 9% 11% 0% 2% 100% 100% P APER Source: Public/Private Transfers and Social Capital Survey,World Bank, 2003. MAPPED IN OR MAPPED OUT? 33 FIGURE 3A: THE STRUCTURE OF INTER-HOUSEHOLD TRANSACTIONS FOR ALL TRANSFERS BY RESIDENCY (FROM HH) 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% The same Another Other city Abroad locality village Very poor (0­4 USD) Rich (16,1+) Source: Public/Private Transfers and Social Capital Survey,World Bank, 2003. FIGURE 3B: THE STRUCTURE OF INTER-HOUSEHOLD TRANSACTIONS FOR ALL TRANSFERS BY RESIDENCY (TO HH) 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% The same Another Other city Abroad locality village Very poor (0­4 USD) Rich (16,1+) Source: Public/Private Transfers and Social Capital Survey,World Bank, 2003. Geography of Transactions--Distance at a Premium The difference in the patterns of informal transactions between urban and rural households is also substantial. Populations of large urban settlements (exceeding 100,000 inhabitants), of smaller urban settlements (population below 100,000), and of large rural settlements (more than 5,000 inhabitants) receive a high share of informal flows from abroad in the form of remittances. The poor, particularly the rural poor, are more confined to transactions in the same localities and have little access to remittances from abroad (Table 13, Figure 3a and 3b). 34 WORLD BANK WORKING PAPER Conclusion To conclude, by using an expanded and a more detailed battery of questions than is customary for this kind of inquiry, we find informal transactions to be widespread across all population strata and quintiles (97 per cent of participating households). Informal inflows are an important source of income for poor households, constituting almost 18 per cent of a total household income. A startling finding is that informal transactions are income neutral and, unlike findings in literature on inter-household transfers in both developing and developed countries, do not serve as means- tested flows, an outcome that here is partially attributed to the severance of weak ties and post- socialist dislocation. However, the study also finds that strong familial ties are weaker for the poorer than for the richer quintile as well, as the poor repot giving and receiving significantly fewer gifts from their friends and relatives than does the richest quintile. While summarily informal transactions are income neutral, individually gift giving and payment for other services are found to be mildly progressive and in-kind exchanges of gifts and services are highly progressive. Surprisingly, informal lending is regressive, attributable to the lack of tradition of usury and other forms of informal lending under socialism, dependence on the state, and apprehension of indebtedness expressed by the poor during the focus group sessions. Mapping out informal transactions qualitatively, we note that the poor operate in a different paradigm of informality. Informal transactions of the poor are primarily in kind with neighbors, likely to be equally poor, and explicitly reciprocate. Distance, cash, friendship and interactions with relatives come at a premium as they involve additional resources in the case of distance, participating in market transactions (or receiving cash benefits) in the case of cash, and the ability to maintain altruistic gift giving and often costly communications channels in the case of friendship and contacts with relatives. Poverty in Romania leads to greater isolation and substantively different modality of social interactions. CHAPTER 4 WHO PARTICIPATES IN INFORMAL TRANSACTIONS? I n this section welfare and social capital characteristics of households are examined in relation to the propensity of a household to be a net donor versus a net recipient of flows, or to abstain/be excluded from participating in informal transactions. The relationship between inter-household transactions and social assistance transfers (the MIG program) is examined as well. Net donors dominate the sample: nearly 60 per cent of respondents perceive themselves to be net donors, and around 37 per cent see themselves as net recipients (see the discussion of this phenomenon above). More rural households are among net donors and significantly less abstain from transacting with other households (Table 14). Household Welfare In terms of household welfare, net donors have higher household income, own more assets, and are more satisfied with their current financial status. Net recipients consume more than other categories and find themselves in poorer health. "Others" households not involved in transfers, have the lowest income, own the least assets, and consume less than other households for urban and rural areas respectively. In terms of public assistance, recipients of private transfers are also receiving more Minimum Income Guarantee (MIG) payments than net donors, indicating the potential for a "crowding in" effect. Urban "others" receive the lowest MIG payments, while rural "others" receive the highest MIG-related transfers. The latter may be related to the higher share of multigenerational families among rural "others" than in other groups. The picture is reversed for other social transfers; with urban "others" receiving the highest level of assistance, while rural "others" receive the least non-MIG assistance per household. Such a reversed picture may be connected to the higher level of transparency in rural areas, where the financial status of socially "unconnected" households is more apparent to neighbors as well as to social evaluators for the MIG program (Table 15). 35 36 WORLD BANK WORKING PAPER TABLE 14: PARTICIPATION IN INFORMAL TRANSACTIONS Number Percentage Net Transfer Donors 1545 59.61% Urban 912 57.72% Rural 633 62.55% Net Transfer Recipients 963 37.15% Urban 605 38.29% Rural 358 35.38% Net Transfer Equals Zero (Others) 84 3.24% Urban 63 3.99% Rural 21 2.08% Total 2592 100% Urban 1580 100% Rural 1012 100% Source: Public/Private Transfers and Social Capital Survey,World Bank, 2003. TABLE 15: WELFARE CHARACTERISTICS All Net Net Welfare Characteristics Households Donors Recipients Others Total Household Income mean in lei 67,200,000 69,500,000 64,300,000 59,700,000 Urban 83,200,000 87,700,000 77,800,000 67,900,000 Rural 42,400,000 43,100,000 41,500,000 35,200,000 MIG Recipients (lei) 822,998 736,669 981,362 595,298 Urban 719,275 622,092 927,441 127,064 Rural 984,936 901,746 1,072,486 2,000,000 Non-MIG Assistance (lei) 1,176,274 873,120 1,342,724 4,843,929 Urban 1,448,751 1,053,869 1,538,205 6,306,103 Rural 750,866 612,704 1,012,372 457,409 Consumption (per adult per day in $) (mean) 3.60 3.53 3.71 3.60 Urban 4.29 4.28 4.32 4.23 Rural 2.52 2.46 2.69 1.70 Assets (number of durable goods) 9.20 9.37 8.94 8.83 Urban 10.5 10.75 10.20 9.9 Rural 7.16 7.39 6.82 5.62 Satisfaction with Financial Situation (1-10) 4.06 4.16 3.93 3.76 Urban 4.13 4.27 3.94 4.05 Rural 3.95 4 3.93 2.9 Percentage in good health 55.07% 56.33% 52.45% 61.90% Urban 61.45% 63.56% 58.37% 60.32% Rural 45.09% 45.87% 42.46% 66.67% Note: In 2002, the average exchange rate was 33,055.40 lei per US dollar. Source: Public/Private Transfers and Social Capital Survey,World Bank, 2003. MAPPED IN OR MAPPED OUT? 37 Household Characteristics Households not participating in exchanges with other households--"others" in urban areas are older on average, do not live in female-headed households (defined as female respondent and the main breadwinner), and have the highest share of pensioners per household. In rural areas the households not involved in exchanges have more pensioners per household and are most likely to live in a multigenerational household. Net recipients have the highest share of female-headed households and are younger in urban areas. The latter observation is borne by explanations provided in focus groups that older rural parents often transfer resources to urban children in the form of foodstuffs produced on private plots (Table 16). Social Capital Different measures of social capital show a pattern for households involved and households not involved in transactions, or "others." "Other" households have a high level of general trust in people, but low levels of specific trust. They trust those living next to them, their neighbors, the least. Urban "other" households feel the least that the poor need assistance, have the least active interactions with neighbors, have fewer close friends, and feel less likely to get assistance in time of need. Most importantly, uninvolved households ("others") do not participate in such collective activities as community projects, local assistance for the needy, or efforts to solve a community problem. However, they are active members of formal private organizations and associations, which is not inconsistent with the self­serving nature of private formal networks discussed above (Table 17). Inter-household Flows: Multivariate Tests In this and other studies income tends to be correlated with urban-rural status, household size, and other variables. Multivariate analyses, described in more detail in Appendix B, test the effects of income on inter-household inflows and outflows, controlling for other variables. TABLE 16: HOUSEHOLD CHARACTERISTICS All Net Net HH Characteristics Households Donors Recipients Others Age of the Subject 52.23 52.12 52.21 54.49 Urban 50.56 51.02 49.47 54.44 Rural 54.83 53.70 56.83 54.62 Share of Female Headed HH 15.93% 13.46% 20.46% 9.52% Urban 15.32% 14.14% 17.85% 7.94% Rural 16.90% 12.48% 24.86% 14.29% Share of HH with Pensioner Present 59.10% 59.09% 58.77% 63.10% Urban 53.61% 54.93% 51.07% 58.73% Rural 67.69% 65.07% 71.79% 76.19% HH size (number of Individuals) 3.03 3.12 2.91 2.9 Urban 1.06 1.07 1.06 1.02 Rural 3.08 3.21 2.84 3.19 Multigenerational 18.09% 18.12% 17.86% 20.24% Urban 14.75% 15.13% 14.21% 14.29% Rural 23.32% 22.43% 24.02% 38.10% Source: Public/Private Transfers and Social Capital Survey,World Bank, 2003. 38 WORLD BANK WORKING PAPER TABLE 17: SOCIAL CAPITAL All Net Net Social Capital Households Donors Recipients Others Trusting other people 37.03% 36.78% 37.01% 41.67% Urban 36.08% 36.26% 35.27% 41.27% Rural 38.52% 37.54% 40.00% 42.86% Trusting neighbors 57.98% 58.54% 57.39% 54.32% Urban 60.51% 61.29% 59.72% 56.67% Rural 54.11% 54.65% 53.54% 47.62% Need to help the poor 65.13% 65.42% 65.30% 57.69% Urban 64.65% 64.71% 65.54% 55.17% Rural 65.85% 66.39% 64.91% 65.00% Relationship with neighbors 0.209 0.211 0.210 0.156 Urban 0.193 0.196 0.192 0.163 Rural 0.233 0.233 0.239 0.133 Number of close friends 8.208 8.396 8.086 6.159 Urban 7.669 8.075 7.293 5.452 Rural 9.067 8.863 9.479 8.35 Ability to get help when in need 1.838 1.864 1.853 1.19 Urban 2.062 2.13 2.031 1.365 Rural 1.488 1.48 1.55 0.667 Collective Action and Cooperation 0.0013 0.0047 0.0006 -0.0534 Urban 0.0079 0.0103 0.0117 -0.0625 Rural -0.0090 -0.0034 -0.0181 -0.0261 Groups and Networks Number of memberships in different org. 1.076 1.0460 1.0620 1.7857 Urban 1.2076 1.1732 1.1802 1.9683 Rural 0.8706 0.8626 0.8631 1.2381 Source: Public/Private Transfers and Social Capital Survey,World Bank, 2003. In these tests, MIG income is positively but weakly related to gross inflows. Other social assistance income is strongly associated with higher inflows. Net inflows--inflows minus outflows--are unrelated to MIG assistance. These results are consistent with the possibility that public assistance does not "crowd out" private transfers: "crowd out" would be indicated by an inverse relationship between MIG and inter-household inflows. However, the measured relationships could capture both a (negative) "crowd out" effect and a (positive) effect of otherwise unobserved characteristics associated with need. Only by controlling fully for a household's need for private assistance, with variables other than MIG assistance, could we confidently attribute the MIG coefficient to the effects of "crowd out" or absence of "crowd out". On balance, inter-household transactions are neither progressive nor regressive: holding other factors constant, income is unrelated to net inflows. Assets, however, are significantly related to lower net inflows; by this measure, inter-household transactions have progressive effects. Inflows and outflows are both higher for land owners, and lower for home owners, but neither variable is related to net inflows. MAPPED IN OR MAPPED OUT? 39 Outflows, but not inflows, are higher for rural than for urban households, controlling for other factors. Net inflows are more negative for rural than for urban households. Inflows and net inflows (but not outflows) increase with age up to about age 68, and then decline as age increases further. Inflows (but not net inflows, or outflows) are lower in households with more adults, and higher in households with more children. Inter-household Flows and MIG Assistance Inter-household transactions could potentially affect the level of MIG social assistance received. Households receiving gifts, loans or other inflows might be less likely to apply for MIG than other equally poor households that benefit less from inter-household transactions. Those that apply might be less likely to qualify, or may qualify for more modest benefits if these transactions make them better off--for example, if they use gifts to purchase assets that count against MIG eligibility. Table 15 shows that rural households not involved in inter-household exchanges receive far higher levels of MIG assistance than those that are, suggesting the possibility of "crowd out" of public assistance by private informal assistance. Table 15 also shows, however, evidence of "crowd in" among urban households: those involved in inter-household transactions actually receive much higher MIG and other assistance than other households. Because urban-rural differences are related to income levels and to the volume of inter-household transactions, a fuller investigation of these relationships requires multivariate analysis, described more fully in Appendix B. These multivariate tests show no evidence to suggest that the benefits to the poor from inter-household transactions are offset by accompanying reductions in their public assistance benefits. These tests are not conclusive, however, as they cannot fully control for factors that may affect either eligibility for MIG or gifts and informal loans received. There is some reassuring evidence that MIG works as planned: households receive more assistance if they have more children, lower incomes, fewer luxury assets, or fewer assets with income-producing potential. More unsettling are several findings that suggest benefits are affected by other factors unrelated to need, weakening the pro-poor redistributive impact of MIG. Benefits are lower--controlling for income and other variables--in localities that raise fewer revenues locally, and have mayors from the PSD (the ruling Social Democratic Party) or who have been in office longer, suggesting that political influence might affect allocations independently of need. Benefits are also lower in municipalities with fewer Roma. In the chapter that follows we examine whether the level and forms of social capital in a locality as a collective resource affects the accountability of local government, the level of corruption, the performance of local officials, and the level of trust in those officials. We also examine the effect of social capital on policy execution; here social service delivery, effectiveness of local administration, and satisfaction with government performance. CHAPTER 5 SOCIAL CAPITAL, LOCAL GOVERNANCE, AND EMPOWERMENT OF THE POOR T he analysis captures positive effects of measures of community activism and social cohesion on the performance of local government and, alternatively, negative effects of ethnic fractionalization. Importantly, high social capital in a locality is related to higher trust in local administration, specifically, the mayor. Social Capital and Access to Resources--The Case of Triple Exclusion? There are multiple and contrasting aspects of "social capital" that can help make government more responsive to citizens' demands at the local and national level. There is certainly no consistent pattern by which the poor are disadvantaged relative to the rich on all of these dimensions of social capital. However, on balance, the evidence from this survey suggests that poorer and rural households may suffer "triple exclusion." Not only do formal and informal market and inter- household activities favor rich and urban households, they also appear to have a more effective voice with respect to government services. Wealthier (Table 18) and urban (Table 19) households tend to belong to more associations. Trust in "most people" differs little across quintiles, and is slightly higher among rural than urban households. Wealthier individuals tend to have more trust in people in their own villages or neighborhoods. Rural people do as well, no doubt because fewer of them are strangers. Surprisingly, poorer people have somewhat higher trust in local and central government officials, perhaps because the standards for what constitutes good governance tend to rise with education. The large gap between urban and rural households in trust in local officials is unsurprising, because governments in smaller localities are "closer to the people" and it is easier to satisfy smaller, more homogeneous constituencies. More surprising, however, is the nearly-as-large gap in trust in the central government between urban and rural households. An index of cooperation with neighbors (e.g. in solving common problems) differs little across quintiles, but is higher for rural than for urban households. Similarly, rural people report having more close friends than urban residents. Across quintiles, the rich report having the most close friends. Not 41 42 WORLD BANK WORKING PAPER TABLE 18: SOCIAL CAPITAL BY QUINTILE Quintiles 1 2 3 4 5 Number of associational memberships 0.71 0.99 1.04 1.3 1.34 % who trust . . . "Most people" 37.1 37.1 36.3 35.2 39.4 People in village/neighborhood 35.7 34.7 38.8 37 40.5 Local government officials 24.2 22.1 23.2 17 18.9 Central government officials 23.7 21.7 19.8 18.4 17.5 Cooperation with neighbors (0­1) 0.21 0.21 0.2 0.21 0.22 Number of close friends 8.2 7.9 7.2 8.7 9.1 No. of people could borrow cash from 2.1 2.9 2.9 3.4 4.9 Max. amount could borrow (million lei) 18 56 27 40 179 Know someone who could help solve . . . Health problem 34.9 51.5 53.2 61.2 75 Legal problem 14.5 25.8 27.1 36.5 51.5 Administrative problem 25.1 31.6 30.5 34.3 45.5 Problem with police 15.9 23.9 23.8 30.5 39.6 Problem at bank 10.9 16.1 15.7 25.6 35.8 Problem getting a job 8.9 14.5 18.2 21.2 29.1 Offer "gifts" to solve City Hall problem 11.3 5.1 8.1 9.4 12.5 Satisfied with way treated? 65.3 74.4 69.4 72.3 73.6 Contact local officials on public issue 8.4 6.6 8.7 12.7 15.7 Contact nat'l officials on public issue 0.8 0.2 1.4 3.1 5.3 Civic activism index -0.08 -0.07 0.01 0.02 0.12 Vote in local elections 93.4 93.6 92.5 92.3 92.1 Vote in national elections 93.4 93.4 91.7 92.3 92.8 Response to community problem Do nothing 25.9 22.3 17.0 17.8 17.2 File complaint with authorities 11.2 9.3 8.9 10.2 8.1 Try to solve it alone 14.6 15.0 17.0 16.0 15.9 Try to solve it together with others 40.5 50.4 53.4 52.7 56.5 Source: Public/Private Transfers and Social Capital Survey,World Bank, 2003. surprisingly, wealthier and urban households report having a larger number of people from which they could borrow 3 or 4 million lei [US$90-121]. In response to a question about the maximum amount of money they could borrow from all sources, wealthy and urban households report far higher amounts. The amount for the top quintile is 10 times that of the lowest quintile (Table 18, Table 19). The rich are better "connected" than the poor. For each of the six types of problems described, the rich were far more likely than the poor to indicate that they knew someone who could help them solve the problem. Urban-rural differences were less dramatic, but mostly favor urban residents, particularly on contacts who can solve legal problems (Table 18, Table 19).9 9. Multivariate tests show that the number of connections who can help solve problems increases with income, education, church membership, and cooperation with neighbors, and decreases with age. MAPPED IN OR MAPPED OUT? 43 TABLE 19: SOCIAL CAPITAL BY URBAN/RURAL Rural Urban Number of Associational Memberships 0.87 1.21 % who trust . . . "Most people" 38.5 36.1 People in village/neighborhood 39.1 36.2 Local government officials 32 14.3 Central government officials 27.5 15.8 Cooperation with neighbors (0­1) 0.23 0.19 Number of close friends 9.1 7.7 No. of people could borrow cash from 2.7 3.6 Max. amount could borrow (million lei) 18 56 Know someone who could help solve . . . Health problem 46.6 60.6 Legal problem 19.4 38.5 Administrative problem 34.9 32.4 Problem with police 22.5 29.4 Problem at bank 14.3 24.9 Problem getting a job 12.4 22 Offer "gifts" to solve City Hall problem 7.5 10.7 Satisfied with way treated? 73.8 68.4 Contact local officials on public issue 13.7 8.3 Contact nat'l officials on public issue 1.7 2.5 Civic activism index -0.01 0.01 Vote in local elections 94.9 91.4 Vote in national elections 94.1 91.9 Response to community problem . . . Do nothing 24.2 18.8 File complaint with authorities 11.7 8.8 Try to solve it alone 14.4 17.5 Try to solve it together with others 49.6 54.8 Source: Public/Public Transfers and Social Capital Survey,World Bank, 2003. Rich and urban residents are somewhat more likely to report having offered bribes to City Hall employees to get problems solved. Rural residents were more frequently satisfied with the treatment they received from City Hall employees. The poorest quintile reported the lowest satisfaction on average, but there was little difference among the higher four quintiles (Table 18). The richest quintile contacts local officials regarding broad public issues about twice as often as persons in the bottom two quintiles. Rural residents were much more likely than urban to contact local officials, likely reflecting less severe "free rider" problems where the number of potential beneficiaries is lower. Consistent with this view, rural residents were actually less likely than urban residents to contact national officials regarding public issues, where the scope of collective action problems differs less between urban and rural. Wealthier citizens score higher on a "civic activism" index, based on reported participation in public meetings, protests, etc. Urban scored slightly higher than rural persons; in smaller 44 WORLD BANK WORKING PAPER communities, person-to-person forms of voice may often act as effective substitutes for some forms of mass participation, such as protests seen in urban areas. Rural residents report slightly higher voting turnout rates in both local and national elections. Surprisingly, the poor report slightly higher voting rates than the wealthy (Table 18, Table 19). There are substantial differences in how poor and non-poor respondents react to problems that concern other members of the community (Table 18). More than one-fourth in the poorest quintile report that they "do nothing," compared to one-sixth in the wealthiest quintile. The poorest quintile is also most likely to react by filing a complaint with the authorities, while the richest quintile is least likely to react in this manner. People in the middle and upper quintiles more often respond in a pro-active fashion. They are somewhat more likely to report trying to solve the problem alone. The most pro-active and generally most effective solution, however, is to solve community problems together with others. This approach is followed by half or more of respondents in the top four quintiles, led by the richest quintile's 56.5 percent. Only 40.5 percent in the poorest quintile respond in this manner. These poor/rich differences in Table 18 are broadly replicated in rural/urban differences in Table 19. Social Capital, Local Governance, and Public Assistance Social capital is not only a resource that gives households access to exchange networks or to well- connected persons who can solve household-specific problems. At the community level, social capital can influence the level of public resources, the way in which they are allocated, and the efficiency with which they are spent. Multivariate analysis of the determinants of MIG assistance indicate that benefits are higher for households residing in localities with high levels of "civic activism," as measured by an index of attending public meetings, participating in protests, participating in election meetings, alerting media to a local problem, and notifying the police or courts about a local problem (Appendix Table B3). Higher civic activism could influence MIG assistance in several ways. First, it may be a factor in obtaining more resources for the locality from county and central governments. Second, to the extent that activism reflects altruism, it could also be associated with greater public support for social assistance programs within the locality. Third, public activism at the local level could be associated with improved accountability of local government, which must consider the possibility citizens will protest in various ways if services are inadequate. To the extent local officials have control over MIG funds and implementation, households residing in communities with greater activism may receive higher MIG assistance. A household's own activism matters, however, only to the degree it contributes to the "public good" of monitoring local government or strengthening the locality's influence over allocation of funds by county and central government. Therefore, a household's own level of activism should be unrelated to MIG assistance, controlling for the mean community level of activism. The household's own level of civic activism turned out to be unrelated to MIG assistance, as expected. Benefits are also higher in localities with mayors who have been in office longer. There are several possible explanations. More experienced mayors may be more effective in lobbying higher levels of government for transfers to local government budgets. They may administer social assistance programs more effectively. Alternatively, causation may go in the other direction, as mayors who manage to run more successful programs improve their chances of re- election. Benefits are also related to the mayor's political party affiliation. Controlling for other influences, households residing in localities with PSD mayors receive higher MIG benefits. However, it is not clear why having a mayor from the PSD matters, because there is no evidence from the 51 localities included in this study that central and county government use their discretion to favor PSD-governed localities. Transfers from central and county government are no higher in PSD-governed localities, and these transfers are not related to the level of MIG benefits anyway. MAPPED IN OR MAPPED OUT? 45 Although there are sizeable earmarked transfers from central government for social assistance, the revenue measure most strongly associated with higher MIG benefits is locally-raised revenues per capita. Localities are expected to cover about 20 percent of the cost of MIG from local revenues. There is wide variation in locally raised revenues, however, and many localities-- particularly smaller and less wealthy localities which are able to raise fewer revenues locally--do not even come close to covering their 20 percent share of costs. This problem has implications for MIG's progressivity. Heating subsidies, in particular, are higher for urban than for rural households (Appendix Table B3). Table 20 shows that poor people tend to reside in localities with fewer public resources. Households are sorted by income quintiles. Figures in the table are means, within the quintile, of locality-level characteristics. Households in the poorest quintile live in localities averaging only 470,000 lei [US$14.21] in locally-raised ("own") revenues per capita in 2002. This amount nearly doubles, to 930,000 lei [US$28.13], for the top quintile. Most of this variation is attributable to urban-rural differences. Sorting urban and rural households separately by quintiles, variation in TABLE 20: LOCAL GOVERNMENT REVENUES PER CAPITA Quintiles by Income 1 2 3 4 5 Own revenues per capita (millions lei) 0.47 0.65 0.78 0.87 0.93 Urban 0.98 1.03 1 1.04 1.06 Rural 0.26 0.31 0.31 0.33 0.4 Social assistance transfers per capita 0.52 0.49 0.42 0.34 0.3 (millions lei) Urban 0.33 0.27 0.26 0.22 0.23 Rural 0.56 0.66 0.63 0.69 0.64 Total county/central govt. transfers per cap. 2.55 2.99 3.11 3.14 3.22 (millions lei) Urban 3.32 3.34 3.32 3.26 3.32 Rural 2 2.69 2.58 2.69 2.75 Total revenues per capita (millions lei) 3.03 3.64 3.88 4.01 4.15 Urban 4.29 4.37 4.32 4.29 4.38 Rural 2.26 3 2.89 3.02 3.14 Quality of public services index -0.074 -0.001 -0.011 0.07 0.107 Urban 0.134 0.117 0.098 0.142 0.181 Rural -0.127 -0.184 -0.162 -0.152 -0.192 Town Hall responsibility only (%) 44 36.3 31.8 28.8 27.3 Urban 24 22.7 23.1 24.1 23.1 Rural 52.1 52.1 49.1 47.9 46.5 % worked on community project 31.4 24.1 20.4 17.1 15 Urban 14.1 12.9 12.1 12.9 12 Rural 36.5 39.2 35.6 35.1 30.1 % gave money for community project 55.3 52.3 50 47.9 47.2 Urban 45.9 45.3 45.6 46.8 45 Rural 59.5 59.2 58.5 59.1 54 Source: Public/Public Transfers and Social Capital Survey,World Bank, 2003. 46 WORLD BANK WORKING PAPER own revenues per capita is very small. Variation among rural households is somewhat larger, however, with own revenues more than 50 percent larger in the top quintile compared to the bottom quintile. Transfers from central and county governments that are earmarked for social assistance are more progressive, both overall and among urban households. However, the poorest quintile of rural households tend to live in localities receiving lower social assistance transfers per capita (Table 20). Moreover, total transfers per capita from county and central government, including those non-earmarked or earmarked for other purposes, are regressive, both overall and among rural households. They are neutral among the urban quintiles (Table 20). The net effect of these transfers, and of own revenues, is markedly regressive: poorer households are more likely than richer households to live in localities with lower revenues per capita. The difference is small among urban households, but is large among rural households, and there are large urban-rural differences (Table 20). These effects not only show up in MIG assistance at the household level, but also, and not unexpectedly, appear to influence the quality of local infrastructure and public services. An index was constructed from public officials' responses to questions about the quality of road maintenance, water supply system, public order, and locality cleanliness, relative to "similar localities from your county". Framing the comparison with respect to similar localities could reduce urban-rural differences in the responses substantially. However, a very large gap between urban and rural localities is still observed (Table 20). Although the richest quintile of urban households tends to benefit from better public services, there is otherwise little systematic variation across quintiles. In fact, the richest rural quintile tends to experience the worst public services of all. Poorer households are systematically more likely to reside in localities where a large percentage of respondents in the household survey think that maintenance of the locality is the sole responsibility of the Town Hall. The poorest two rural quintiles are the most likely to live in such localities (Table 20). However, contributing money or work to community projects is more common in rural than in urban localities, and the quintile in which a household is located makes little difference for the level of such contributions occurring in one's locality (Table 20). Social Capital and Quality of Public Service Delivery At the community level, social capital is a collective resource which helps keep public officials accountable, reducing corruption and improving the quality of public services (Putnam 1993; Boix and Posner 1998; Knack 2002). Monitoring government, protesting against incompetence or malfeasance, or expressing one's preferences through voting, writing letters or other means can be viewed as a collective action problem in which a narrowly self-interested citizen may rationally free ride on the efforts of others. Knowledge of politics and public affairs by large numbers of citizens, coupled with their participation through voting and other modes of citizen voice, are crucial for accountable government in two ways. First, it is important for citizens to articulate their preferences so that officials are aware of the public interest, even where government officials are highly competent and motivated purely by concern for this interest. Second, the knowledge and willingness to exercise voice is necessary to potentially check incompetent bureaucrats and the ability of politicians to enrich themselves or the narrow interests that they are allied with. Narrowly self-interested citizens may also find it rational not to vote, attend meetings or protest rallies, or even to acquire information about the performance of public officials. Social norms and networks that generate voluntary action by citizens help prevent or deter public officials and other narrow interests from exploiting governmental resources and power for their own purposes. Where citizens tend to conform to norms of generalized reciprocity and interpersonal trust is higher, free riding is less frequent. Under these circumstances, governmental performance can be improved by affecting the level and character of political participation, by reducing "rent-seeking," and by enhancing public-interested behaviour. Where trust is higher, voters can more easily overcome the collective action problem in monitoring officials. Where too many citizens "free ride" by being uninformed and unwilling to protest government malfeasance, MAPPED IN OR MAPPED OUT? 47 public officials can more easily indulge in patronage practices and other inefficient policies that serve narrow interests. In addition to making government more accountable, social capital can potentially improve government performance through a second broad mechanism, by reducing inefficiencies associated with the gridlock that arises from political polarization or change-resistant elites. Where trust and norms of reciprocity are stronger, opposing sides are more likely to agree on the ground rules for debate and resolution of disagreements. Where fewer citizens are motivated by a sense of civic obligation to stay informed and to participate in political life, the extremes on the political spectrum are more likely to dominate the public agenda, and debate becomes more polarized. Several measures of the quality of public services and of community-level social capital can be aggregated from the household survey data to test these relationships across localities in Romania. The sample for this study was constructed so that, within the constraints of only 2,641 households, it would be as representative at the locality level as possible. A set of questions inquires about interactions during the last year with various parts of local government: city hall, courts, police, hospitals, and schools. The survey ascertains whether a member of the household tried to solve a problem at each of these institutions. For households responding affirmatively, follow-up questions ask whether the household member offered any "gifts" to employees of these institutions to ensure solution of the problem, and whether the household member was satisfied with the way he or she was treated by the employees. From these questions, two indexes were computed for each locality. First, a corruption index measures the percentage of all interactions with these institutions in each locality in which households indicated that a bribe was offered. This index averages 20.7 percent across localities, ranging from a low of 2.3 percent to a high of 41.8 percent. Second, a "client satisfaction" index measures the percentage of all interactions in which households indicated satisfaction with the way they were treated by employees. This index averaged 76.3 percent, ranging from a low of 56.3 percent to a high of 95.7 percent (Table 20). Where local government has fewer resources to spend on service delivery, a natural hypothesis is that the quality of services may suffer. Multivariate tests (Appendix B, Table 4) confirm that the client satisfaction index is higher in localities with higher total government expenditures per capita. Holding expenditures per capita constant, the quality of public services may be higher in smaller localities for two reasons. When government is "closer to the people" it is likely to be better informed about public preferences. In smaller communities, preferences are also likely to be more homogeneous, making it easier to provide a combination of services satisfactory to the majority of households. On the other hand, there may be economies of scale in service provision that make it more difficult to provide quality services for the same level of per capita expenditures in smaller localities. The necessity of traveling relatively long distances in rural areas to visit city hall, courts, hospitals, or schools could reduce satisfaction of some households. On balance it is therefore difficult to predict whether satisfaction will be positively or negatively related to locality size. Results show that the first set of arguments dominates: client satisfaction is negatively and significantly related to size of the locality, as measured by (log of) population. Mean household income in the locality is unrelated to client satisfaction. Higher-income persons may have higher expectations regarding the quality of services. These expectations could affect the quality of services positively, but they could also raise the threshold for what sort of treatment is considered satisfactory by higher-income survey respondents. The insignificant result for income in this test is consistent with the possibility that these two effects, to the extent they occur at all, roughly offset each other. The main social capital variable included in these tests is an index of relationships with neighbors. Values of the index are higher in localities where more households report discussing "issues that worry you" with neighbors, trying "to solve common problems together" or "problems that concern the whole community," getting together "to help people in need," and trying "to obtain local authority's support for people in need." 48 WORLD BANK WORKING PAPER This index of cooperation among residents of the community is positively and significantly related to client satisfaction with local government (Appendix Table B4). An index of civic activism (constructed from items including attending public meetings, participating in protests, participating in election meetings, alerting media to a local problem, and notifying police or courts about a local problem) produces similar results, although with borderline statistical significance. An alternative approach to measuring social capital uses indicators of potential social polarization, including income inequality and an index of ethnic fractionalization. More ethnically mixed communities have been shown in many studies to be associated with lower levels or quality of public goods and services. These results are typically explained in terms of differing preferences across ethnic groups over issues of public interest (taxation and spending) provision of public services, and distribution of resources among different segments of the community. Public officials might also be less willing to resolve the problems of those from a different ethnic group. If there are relatively few social or economic interactions across ethnic groups there is less opportunity for the dissatisfied citizen to retaliate against the official. An ethnic fractionalization index was created using 1992 census data for each locality on the population share of Roma, Hungarians, Romanians, and others. Following standard practice, the index was computed as one minus the sum of the squared population shares of each of the four groups. The index varies from a low of 0 for several homogeneous ethnically Romanian localities to a high of .52 for a community with 51 percent Hungarians, 2 percent Roma, and approximately 45 percent Romanians. As shown in Figure 4, this index is associated with significantly lower levels of client/citizen satisfaction with local government services (also Appendix Table B4). This variable remains (borderline) significant when a second social capital variable--the relations with neighbors index or the civic activism index--is included in the same regression. Income inequality data by locality were computed from the survey data. Higher inequality (measured by coefficient of variation of total household income) is strongly associated with lower levels of client satisfaction with local government services (Appendix Table B4). In contrast to satisfaction with services, the frequency of offering "gifts" was only weakly related to the social capital and social polarization measures. Table 21 provides a breakdown of these transactions by type of local government institution. About half of the households overall reported interactions with city hall and with hospitals. Fewer FIGURE 4: ETHNIC FRACTIONALIZATION & SATISFACTION 1.0 .9 employees by .8 treatment .7 with .6 Satisfied .5 -.1 0.0 .1 .2 .3 .4 .5 .6 Ethnic fractionalization Source: Public/Private Transfers and Social Capital,World Bank, 2003. MAPPED IN OR MAPPED OUT? 49 TABLE 21: "SOLVING PROBLEMS" AT LOCAL GOVERNMENT INSTITUTIONS Satisfied withTreatment by Employees Offered "gifts" as % of as % of % of Households (as % of as % of All Interactions Interactions Institution with Interactions Interactions) Interactions Involving Gifts Without Gifts City Hall 53.2 9.2 70.7 48.0 73.1 Urban 46.4 10.8 68.4 54.4 70.1 Rural 63.9 7.4 73.3 37.6 76.3 Court 14.5 14.9 66.5 41.1 71.6 Urban 16.8 13.4 65.2 40.0 69.9 Rural 11.1 18.6 69.4 42.9 75.9 Police 19.1 10.6 67.1 49.1 69.4 Urban 21.1 11.9 69.7 55.0 71.8 Rural 16.0 8.0 61.7 30.8 64.9 Hospital 47.2 44.5 83.0 72.7 91.3 Urban 48.9 47.4 80.3 70.1 89.7 Rural 44.5 39.7 87.7 78.2 93.8 School 16.4 16.2 86.0 66.2 89.8 Urban 18.1 20.1 84.0 66.7 88.2 Rural 13.7 8.0 90.2 63.6 92.6 Source: Public/Private Transfers and Social Capital,World Bank, 2003. than 1 in 5 reported interactions with courts, schools, or the police. Interactions with city hall were much more frequent for rural households; interactions with courts, police, hospitals, and schools were all somewhat more frequent for urban households. "Gifts" were offered to government employees in about 45 percent of interactions with hospitals, but were far less frequent in interactions with other institutions. Satisfaction rates were higher for interactions with hospitals and schools than with other institutions. For each of the five institution types, satisfaction rates were far higher for households which did not report offering gifts. This result does not of course imply that offering gifts is ineffective: gifts may be offered where the prospects of getting one's problem solved are otherwise most bleak. Furthermore, dissatisfaction in part may reflect disgust that it was necessary to offer employees bribes. Two other, more subjective, measures of the quality of local government were also analyzed: the level of trust in "local government officials," and in the mayor. These indexes are measured on 5-point scales, and aggregated to the local level. Trust in the mayor varies widely across localities, from a low of 1.9 on the 5-point scale to a high of 3.95. The average value is 2.88. Trust in "local government officials" is slightly lower. Trust in the mayor is higher in smaller localities, consistent with findings described above for client/citizen satisfaction. Public expenditures and mean local income were unrelated to trust. Trust in the mayor is higher where social capital is higher: the relations with neighbors index is positive and significant; so is the civic activism index in results not reported in the table. Trust in the mayor is significantly lower where ethnic fractionalization is higher (Appendix Table B4).10 10. Findings were similar for trust in local officials, so only results for trust in mayor are reported in Table 4, Appendix B. 50 WORLD BANK WORKING PAPER Putnam (1993) traces differences in social capital levels between the North and South of Italy to medieval times, when the Normans established a kingdom in Sicily and southern Italy. Americans whose ancestors immigrated--often 100 or more years ago--from areas of Europe with higher levels of social capital retain high levels of social capital today (Rice and Feldman 1997). These findings raise the possibility that the historical experience of different regions in Romania might have had long-lasting impacts on levels of social capital. The regions dominated by the Ottoman empire well into the 19th century (Wallachia and Moldavia), and by Russia thereafter, differ from those occupied by the Hapsburg empire until 1918 (Transylvania, Banat, and southern Bukovina) in at least several ways that may have potential implications for levels of social capital. First, Protestantism made substantial inroads in Transylvania but not in Wallachia or Moldavia. In comparison with more hierarchically-organized religions (Catholicism, Eastern Orthodoxy, and Islam), Protestantism has been associated with higher levels of interpersonal trust and other measures of social capital in studies using cross- country, cross-state and household-level analyses (Putnam 1993; Fukuyama 1995; La Porta etal. 1997; Putnam 2000; Zak and Knack 2001; Knack 2002). Second, serfdom was abolished by the Hapsburg emperor Joseph II in Transylvania in 1785, while it survived until 1864 in Wallachia and Moldavia. Social capital is generally found to be more prevalent in areas with more egalitarian traditions, as represented by income equality for example (Putnam 1993; Zak and Knack 2001; Knack 2002). Third, the relatively bureaucratized, Weberian public administration of the Hapsburg regions was conducive to greater predictability in interactions among citizens, and between citizens and government. Higher quality public bureaucracy and lower governmental corruption have also been linked to interpersonal trust in cross-country analyses, although causation may run in both directions (Knack and Keefer 1997). Findings from the Romanian survey data are consistent with these arguments. Table 22 shows differences between the Hapsburg and non-Hapsburg regions of Romania on several measures of social capital. The survey contains numerous questions related to social capital, and differences between the regions are small for the majority of questions. Table 5 shows only those measures for which notable differences emerge; for these, the Hapsburg areas consistently exhibit a higher level of social capital. In the formerly Hapsburg areas, for example, 63 percent agree that most people in the village or neighborhood are trustworthy, compared to only 55 percent in the non-Hapsburg areas. An even larger difference is found for a similar question about people's willingness to help others in need. Residents of the Hapsburg region are more likely to trust the mayor and to report satisfaction with treatment by City Hall employees. Similarly, Hapsburg region respondents were TABLE 22: HISTORICAL REGIONS AND SOCIAL CAPITAL (IN PERCENT) Hapsburg Non-Hapsburg Most people in village or neighborhood can be trusted 63.2 54.6 Most people in village or neighborhood are willing to help 57.0 42.8 Solve community problems together with neighbors 30.9 26.2 Attended village or neighborhood meetings or public hearings 31.1 25.6 Only Town Hall should be concerned with maintenance 29.4 34.8 Trust mayor to great extent or very great extent 37.8 32.0 Satisfied with treatment by City Hall employees 76.1 67.7 Offered "gifts" to City Hall employees to solve problem 7.6 10.0 Maximum sample size 987 1647 Source: Public/Private Transfers and Social Capital,World Bank, 2003. MAPPED IN OR MAPPED OUT? 51 least likely to report offering "gifts," and least likely to say that maintenance of the locality was something that only the Town Hall should be concerned with.11 Decentralization and Local Government Efficacy Decentralized provision of public services is commonly justified on the grounds that local government is better attuned to preferences of its citizens, and that citizens can exercise voice and monitor performance more effectively over local government, because collective action problems among the citizenry are less severe at the local level. Survey evidence in Romania confirms that confidence in local government is higher. About 46 percent of respondents trust central government officials only to a small or very small extent, compared to 42 percent for local government officials, and 37 percent for the mayor. In a Gallup survey conducted in August of 2002, 89 percent of respondents (92 percent of urban and 86 percent of rural) believed that the country was run for the benefit of a few big interests rather than for the benefit of all the people. Only 70 percent (61 percent of rural and 79 percent of urban) believed that their own community was run for the benefit of a few big interests.12 However, decentralization can potentially worsen service delivery in localities with few resources and limited administrative capacity, or where responsibilities are not clearly delineated across levels of government. In the survey of 203 local public officials conducted for this study, the most frequent complaint of this sort, for officials of both urban and rural localities, was unfunded mandates from the central government: 73 percent of urban and 46 percent of rural officials cited as a common problem that there were "too many responsibilities assigned to the municipality by central government given present resources" (Table 22). Surprisingly, analysis shows that the frequency of this complaint is unrelated to average incomes, locally-raised revenues, or transfers from central government. Community size and mayor's party are the key determinants of whether local officials perceive unfunded mandates, unclear division of responsibilities, interference from national authorities, and weak local capacity as problems (Table 22). Only concerning "interference from county authorities" do rural officials complain more than urban officials. Officials from localities with non-PSD mayors cite each of the nine problems listed in Table 22 more frequently. Interestingly, analysis of local government revenue data for the 51 localities represented in these surveys does not support the common view that central government transfers are more generous to localities with PSD mayors. However, a more thorough study of this issue would require analyzing all local governments in the country. Other survey questions indicate that officials in localities without mayors from the PSD believe their interests are neglected by county and national authorities (Table 23). For example, 41 percent of officials in non-PSD localities, but only 17 percent in localities with PSD mayors, believe the county administration pays less attention to their locality than to other localities in the county. A large percentage of officials from PSD and non-PSD localities believe personal relationships influence funds allocation to local government. Concerning funds from central government, substantially more officials from localities without PSD mayors believe personal relationships are important. There are no consistent differences in these responses between urban and rural officials. For example, rural are more likely than urban officials to indicate that local elected officials are often consulted by county authorities, but the reverse is true for consultations with national authorities (Table 23). 11. When this two-way distinction is replaced by a three-way classification of regions, social capital levels are generally found to be somewhat higher in Wallachia than in Moldavia, although these differences are more modest than those between either region and Transylvania. These regional differences remain when controlling for locality size, urban-rural status, ethnic composition and diversity, and income levels. 12. See Sandu etal. (2000) for similar evidence from surveys conducted in 1997­2000. 52 WORLD BANK WORKING PAPER TABLE 23: PERCEPTIONS OF INTER-GOVERNMENTAL RELATIONS BY LOCAL OFFICIALS (PERCENT PERCEIVING PROBLEM AS BEING FREQUENT) Urban Rural PSD Non-PSD Too many responsibilities given resources 73.0 46.3 51.2 76.5 Restrictive rules imposed by central government 57.8 30.5 38.3 56.5 Unclear division of responsibility 22.8 13.3 14.8 23.9 Interference from county authorities 16.0 22.7 17.3 22.9 Interference from central authorities 21.2 8.3 10.3 37.1 Too little discretion in revenue-raising 32.0 23.7 22.6 32.9 Too little discretion in expenditure decisions 30.3 22.9 23.2 32.9 Too little authority in development policy 23.5 20.6 16.0 32.9 Insufficient capacity to implement local programs 55.6 39.2 39.4 62.3 Source: Public/Private Transfers and Social Capital,World Bank, 2003. TABLE 24: PERCEPTIONS OF LOCAL GOVERNMENT INFLUENCE WITH COUNTY OR CENTRAL GOVERNMENT (PERCENT WHO AGREE WITH STATEMENT) Urban Rural PSD Non-PSD County administration pays less attention to your 22.8 27.8 16.9 41.2 locality than others National administration pays less attention to your 33.0 30.3 23.3 47.0 commune than others Funds allocation from county are often based 41.0 45.9 43.9 42.3 on personal relationships Funds allocation from central government are 39.1 36.7 35.6 42.3 often based on personal relationships Local elected officials are frequently consulted by 78.1 89.9 87.1 77.5 county authorities Local elected officials are frequently consulted by 63.8 57.1 65.2 52.1 national authorities Source: Public/Private Transfers and Social Capital,World Bank, 2003. Given the perceived importance of networks and personal relationships, one would expect localities with longer-tenured mayors to be more influential. However, the officials' surveys do not support this assertion. Officials in localities with re-elected mayors do not perceive greater influence for their localities. For example, officials in localities with re-elected mayors are somewhat more likely to complain that county and national authorities pay less attention to their localities than to others in the county. CHAPTER 6 POLICY IMPLICATIONS Private formal flows are found to be largely regressive, and private informal flows income neutral. The poor appear to be less likely to benefit from both altruistic inter-household flows and transfers from private formal organizations. These observations make well- targeted public assistance even more vital to the livelihood of the poor. Controlling for other variables, MIG payments are lower in rural areas. The rural poor do not seem to be receiving their fair share of MIG payments, even though focus groups indicate that they rely on MIG payments for their livelihood more than urban households. The poor count on these payments both as a single source of cash, and as a means of obtaining informal loans. The MIG scheme for rural areas needs to be revisited in terms of levels of benefits. MIG targeting is impaired by variables not related to poverty. Smaller and poorer localities get less MIG assistance for their poor. Localities with mayors that have been elected to office more than once get more MIG assistance. Localities that have more active and socially involved populations get more MIG assistance. These findings should be taken into account by policymakers when adjusting MIG targeting schemes. While the end result--the benefit--is highly appreciated by the recipients, the process of accessing MIG is found to be faulty. This is due to: 1) corruption, 2) indifference and arbitrariness of local officials, 3) high costs of obtaining and filing documentation, and 4) high transactions costs in terms of time and access to information about MIG benefits both in urban and rural areas. This is particularly true of rural areas, where lower average level of education among the poor makes it more difficult to deal with the paperwork and with the multiple offices that need to be visited to file an application, and, ultimately, to receive the benefit. Also, transportation and filing costs are reported to be high and highly varied depending on the locality. The process of filing documentation and eligibility criteria need to be streamlined to leave less room for local officials to arbitrarily increase the burden of proof to the poor, thus opening the door to more bribes and corruption. 53 54 WORLD BANK WORKING PAPER The poor are less likely to have access to public officials at the time of need. The poor are also found to be less socially active and less likely to defend their rights at the local and national levels. A special outreach program could be designed for public officials to initiate contacts with residents of poor areas to get a better picture of their needs and to provide assistance in a more timely manner. Social capital, on balance, was found to positively affect interactions between local administration and the population as well as execution of public programs. Furthermore, a socially active stance is positively related to social assistance, specifically, MIG-related programs. There are no clear recipes for building social capital. The history of interaction between the population and the state importantly also affects trust and collective action. However, public policies that encourage transparent channels of resource distribution and empower the population, particularly the poor, to participate in budgetary decision-making is likely to encourage activism, and to improve targeting of social assistance programs at the community level. Controlling for other variables, areas with a higher share of Roma in the population are receiving lower levels of MIG assistance. A separate strategy needs to be developed for reaching the Roma poor. Total transfers per capita from county and central government are found to be regressive both overall and among rural households, with the net effect that poorer households are more likely to live in localities with lower revenue than richer households. These finding are compounded by the results that activism levels are lower among the poor. Therefore, for the government to be successful in its anti-poverty campaign, other transfers, not just MIG-related flows, need to be distributed in a less regressive manner. APPENDIX A APPENDIX TABLES 55 56 TABLE A1A: NET TOTAL INCOME--URBAN AVERAGE FOR 2002--BY NUMBER OF HOUSEHOLDS (1,540 HOUSEHOLDS) W ORLD Informal Income by Category Informal Inter-householdTransfers B FormalTransfer by Category Informal ANK Other Wages, W Transfers Transfers Small Scale Formal ORKING Net from from Agricultural Earned Income Formal Formal Public Public Formal Formal Informal Production Income Private Transfer Social Social Public Private Income and Leasing P Household (A) Salary Business (3) Benefits Assistance Sources Sources (B) of Land Gift Exchange Other Total Income APER Type (1+2+3) (1) (2) (a+b+c+d) (a) (b) (c) (d) (f+g+h) (f) (g) (h) (C) (A+B+C) Q1 lei 29,824,220 12,600,000 1,429,918 15,794,302 11,900,000 1,400,497 2,427,328 66,477 -1,406,833 4,925,305 -6,463,759 131,621 1,940,098 30,357,485 #HHs 149 64 9 140 124 53 68 4 150 150 141 43 32 150 Q2 lei 47,449,681 29,200,000 1,332,836 16,916,845 13,600,000 898,093 2,137,355 281,397 3,141,203 6,867,668 -3,267,010 -459,455 3,725,823 54,301,595 #HHs 267 188 13 252 238 78 117 15 268 268 254 47 59 268 Q3 lei 64,011,324 40,800,000 1,281,846 21,929,478 17,300,000 596,689 3,513,056 519,732 4,242,150 6,493,404 -2,187,453 -63,801 3,013,653 71,346,819 #HHs 324 226 15 283 262 65 143 27 325 325 302 64 64 325 Q4 lei 79,015,241 49,700,000 1,973,259 27,341,982 21,600,000 814,276 4,403,835 523,872 6,820,474 9,567,489 -2,905,522 158,507 4,447,410 90,256,237 #HHs 389 248 20 345 313 82 189 29 391 391 364 82 102 391 Q5 lei 151,112,114 77,100,000 29,000,000 45,012,114 22,900,000 1,085,470 17,000,000 4,026,644 16,574,422 13,043,888 3,253,891 276,643 8,895,891 176,771,686 #HHs 404 257 56 346 302 79 227 31 406 406 381 83 108 406 Total lei 84,480,590 47,800,000 8,776,669 27,903,921 18,700,000 911,793 6,933,801 1,358,327 7,401,479 8,912,685 -1,543,705 32,499 4,945,530 96,873,060 #HHs 1,533 983 113 1,366 1,239 357 744 106 1542 1,542 1,444 319 365 1542 Q1 % lei 98.24% 41.51% 4.71% 52.03% 39.20% 4.61% 8.03% 0.22% -4.63% 16.29% -21.29% 0.44% 6.42% 100% % HHs 98.68% 42.38% 5.96% 92.72% 82.12% 35.10% 45.03% 2.65% 100.00% 100.00% 94.04% 28.48% 21.19% 100% Q2 % lei 87.36% 53.76% 2.45% 31.14% 25.04% 1.65% 3.94% 0.52% 5.78% 12.65% -6.01% -0.85% 6.86% 100% % HHs 99.63% 70.15% 4.85% 94.03% 88.81% 29.10% 43.66% 5.60% 100.00% 100.00% 94.78% 17.54% 22.01% 100% Q3 % lei 89.82% 57.25% 1.80% 30.77% 24.27% 0.84% 4.92% 0.73% 5.95% 9.10% -3.07% -0.09% 4.22% 100% % HHs 99.69% 69.54% 4.62% 87.08% 80.62% 20.00% 44.00% 8.31% 100.00% 100.00% 92.92% 19.69% 19.69% 100% Q4 % lei 87.52% 55.05% 2.19% 30.28% 23.92% 0.90% 4.88% 0.58% 7.85% 10.60% -3.22% 0.18% 4.93% 100% % HHs 99.23% 63.27% 5.10% 88.01% 79.85% 20.92% 48.21% 7.40% 100.00% 100.00% 93.11% 20.92% 26.02% 100% Q5 % lei 85.58% 43.66% 16.42% 25.49% 12.97% 0.61% 9.62% 2.28% 9.69% 7.38% 1.84% 0.16% 5.03% 100% % HHs 99.51% 63.30% 13.79% 85.22% 74.38% 19.46% 55.91% 7.64% 100.00% 100.00% 93.84% 20.44% 26.60% 100% Total % lei 87.25% 49.37% 9.06% 28.82% 19.31% 0.94% 7.16% 1.40% 7.64% 9.20% -1.59% 0.03% 5.11% 100% % HHs 99.42% 63.75% 7.33% 88.59% 80.35% 23.15% 48.25% 6.87% 100.00% 100.00% 93.64% 20.69% 23.67% 100% Formal Income: salary, income through civil convention/ collaboration contract, independent authorized non/agricultural activities, State old age pension,Veteran or disability pension, CAP pension, scholarships, child benefits, other social payments, income from investments, savings, rent on other properties, income from business profit, formal public and private assistance (such as social allowances, emergency relief, etc.) FormalTransfers: state old pension + veteran pension or disability pension + CAP pension + scholarship + child benefits + other social payments + formal public and private assistance (such as social allowances, emergency relief, etc.) Public Social Benefit: State old age pension,Veteran or disability pension, CAP pension, scholarships, child benefits; Public Social Assistance: social allowances, emergency relief, allowances for the wives of conscripts, subsidies for heating dwellings connected to the public heating system, subsidies for heating by fuel, firewood and/or coal; OtherTransfers from Formal Public Sources: Formal public assistance from the local council, police, prefect's office, National Government, City Hall, Communal administration agency, and public hospitals and schools; subventions for medical assistance (e.g. surgery); subsidies for agricultural services; subsidized ticket for traveling by rail; subsidized loans for building/ buying a house; Transfers from Formal Private Sources: Formal private assistance from associations such as theVillage/Neighborhood committee and Parents' committee, and private schools and hospitals + money from sponsors + donations; Informal IncomeTotal: daily wages, small scale agricultural production, leasing of land, others, net gift and donations, net exchanges of services, payments; Earning from Agriculture and informal daily wages: income from daily work or temporary incomes, income from household agricultural production, yearly self- consumption; Income from Rent and Leasing of Land: income for land rented for use, income for land leased to others; Gift: gift inflow-gift outflow; Net exchange: exchange of similar and different services; Other informal sources: payment inflow, money from relatives who work temporarily in another country, other sources. Source: Public/Private Transfers and Social Capital Survey,World Bank, 2003. M APPED INO R M APPED O UT ?5 7 58 TABLE A1B: NET TOTAL INCOME--RURAL AVERAGE FOR 2002--BY NUMBER OF HOUSEHOLDS (1,540 HOUSEHOLDS) W ORLD Informal Income by Category Informal Inter-householdTransfers B FormalTransfer by Category Informal ANK Other Wages, W Transfers Transfers Small Scale Formal ORKING Net from from Agricultural Earned Income Formal Formal Public Public Formal Formal Informal Production Income Private Transfer Social Social Public Private Income and Leasing P Household (A) Salary Business (3) Benefits Assistance Sources Sources (B) of Land Gift Exchange Other Total Income APER Type (1+2+3) (1) (2) (a+b+c+d) (a) (b) (c) (d) (f+g+h) (f) (g) (h) (C) (A+B+C) Q1 lei 15,687,908 4,419,134 544,138 10,724,636 8,797,417 695,518 1,136,713 94,989 4,936,687 8,358,189 -3,304,149 -117,353 2,507,066 23,131,661 #HHs 333 66 10 323 299 80 152 10 367 364 341 291 183 367 Q2 lei 33,051,958 13,900,000 899,203 18,252,755 15,100,000 855,904 2,207,242 89,609 9,022,758 11,322,093 -2,649,025 349,690 2,715,695 44,790,411 #HHs 244 93 8 235 226 35 117 18 251 250 238 219 101 251 Q3 lei 48,694,778 22,000,000 1,713,918 24,980,860 19,100,000 1,006,031 3,986,611 888,218 10,887,350 12,944,237 -2,515,597 458,710 4,577,909 64,160,037 #HHs 191 86 8 185 175 31 97 15 194 192 179 198 69 194 Q4 lei 55,203,579 25,800,000 2,824,778 26,578,801 19,500,000 1,299,127 5,215,944 563,730 17,627,256 18,769,856 -1,153,420 10,820 5,370,812 78,201,647 #HHs 125 53 6 117 112 22 62 12 126 126 119 150 54 126 Q5 lei 77,321,923 33,300,000 7,299,628 36,722,295 20,800,000 3,718,393 10,800,000 1,403,902 42,799,129 42,200,000 -581,651 1,180,780 22,926,696 143,047,748 #HHs 109 41 13 102 95 22 62 9 112 112 104 145 38 112 Total lei 37,299,243 15,600,000 1,839,408 19,859,835 14,800,000 1,186,102 3,437,606 436,127 12,624,382 14,823,169 -2,453,362 254,575 5,457,225 55,380,851 #HHs 1,002 339 45 962 907 190 490 64 1050 1,044 981 1003 445 1,050 Q1 % lei 67.82% 19.10% 2.35% 46.36% 38.03% 3.01% 4.91% 0.41% 21.34% 36.13% -14.28% -0.51% 10.84% 100.00% % HHs 90.74% 17.98% 2.72% 88.01% 81.47% 21.80% 41.42% 2.72% 100.00% 99.18% 92.92% 79.29% 49.86% 100.00% Q2 % lei 73.79% 31.03% 2.01% 40.75% 33.71% 1.91% 4.93% 0.20% 20.14% 25.28% -5.91% 0.78% 6.06% 100.00% % HHs 97.21% 37.05% 3.19% 93.63% 90.04% 13.94% 46.61% 7.17% 100.00% 99.60% 94.82% 87.25% 40.24% 100.00% Q3 % lei 75.90% 34.29% 2.67% 38.94% 29.77% 1.57% 6.21% 1.38% 16.97% 20.17% -3.92% 0.71% 7.14% 100.00% % HHs 98.45% 44.33% 4.12% 95.36% 90.21% 15.98% 50.00% 7.73% 100.00% 98.97% 92.27% 102.06% 35.57% 100.00% Q4 % lei 70.59% 32.99% 3.61% 33.99% 24.94% 1.66% 6.67% 0.72% 22.54% 24.00% -1.47% 0.01% 6.87% 100.00% % HHs 99.21% 42.06% 4.76% 92.86% 88.89% 17.46% 49.21% 9.52% 100.00% 100.00% 94.44% 119.05% 42.86% 100.00% Q5 % lei 54.05% 23.28% 5.10% 25.67% 14.54% 2.60% 7.55% 0.98% 29.92% 29.50% -0.41% 0.83% 16.03% 100.00% % HHs 97.32% 36.61% 11.61% 91.07% 84.82% 19.64% 55.36% 8.04% 100.00% 100.00% 92.86% 129.46% 33.93% 100.00% Total % lei 67.35% 28.17% 3.32% 35.86% 26.72% 2.14% 6.21% 0.79% 22.80% 26.77% -4.43% 0.46% 9.85% 100.00% % HHs 95.43% 32.29% 4.29% 91.62% 86.38% 18.10% 46.67% 6.10% 100.00% 99.43% 93.43% 95.52% 42.38% 100.00% Formal Income: salary, income through civil convention/ collaboration contract, independent authorized non/agricultural activities, State old age pension,Veteran or disability pension, CAP pension, scholarships, child benefits, other social payments, income from investments, savings, rent on other properties, income from business profit, formal public and private assistance (such as social allowances, emergency relief, etc.) FormalTransfers: state old pension + veteran pension or disability pension + CAP pension + scholarship + child benefits + other social payments + formal public and private assistance (such as social allowances, emergency relief, etc.) Public Social Benefit: State old age pension,Veteran or disability pension, CAP pension, scholarships, child benefits; Public Social Assistance: social allowances, emergency relief, allowances for the wives of conscripts, subsidies for heating dwellings connected to the public heating system, subsidies for heating by fuel, firewood and/or coal; OtherTransfers from Formal Public Sources: Formal public assistance from the local council, police, prefect's office, National Government, City Hall, Communal administration agency, and public hospitals and schools; subventions for medical assistance (e.g. surgery); subsidies for agricultural services; subsidized ticket for traveling by rail; subsidized loans for building/ buying a house; Transfers from Formal Private Sources: Formal private assistance from associations such as theVillage/Neighborhood committee and Parents' committee, and private schools and hospitals + money from sponsors + donations; Informal IncomeTotal: daily wages, small scale agricultural production, leasing of land, others, net gift and donations, net exchanges of services, payments; Earning from Agriculture and informal daily wages: income from daily work or temporary incomes, income from household agricultural production, yearly self- consumption; Income from Rent and Leasing of Land: income for land rented for use, income for land leased to others; Gift: gift inflow-gift outflow; Net exchange: exchange of similar and different services; Other informal sources: payment inflow, money from relatives who work temporarily in another country, other sources. Source: Public/Private Transfers and Social Capital Survey,World Bank, 2003. M APPED INO R M APPED O UT ?5 9 60 TABLE A2A: TRANSFERS FROM PUBLIC SERVICE PROVIDING INSTITUTIONS AND FROM PUBLIC ASSISTANCE PROGRAMS, BY QUINTILE W (URBAN, RURAL) ORLD B Urban ANK Average Amount Average Amount W of Transfers from As a Share of of Transfers from As a Share of ORKING Public Service As a Share of Income before Other Public As a Share of Income before Variable Providers theTransfer theTransfer Programs theTransfer theTransfer P Quintile 1 758,558 5.6% 2.73% 1,668,770 2.9% 6.00% APER Quintile 2 750,858 10.0% 1.42% 1,386,497 4.3% 2.63% Quintile 3 898,450 14.8% 1.32% 2,614,606 10.1% 3.85% Quintile 4 1,213,785 22.4% 1.42% 3,190,050 13.8% 3.72% Quintile 5 2,537,384 51.3% 1.60% 14,462,616 68.8% 9.10% All HHs 1,320,522 100.0% 1.47% 5,613,279 100.0% 6.24% Rural Average Amount Average Amount of Transfers from As a Share of of Transfers from As a share of Other Public As a Share of Income before Public Service As a Share of Income before Variable Programs theTransfer theTransfer Providers theTransfer theTransfer Quintile 1 358,443 21.3% 1.62% 778,270 9.6% 3.52% Quintile 2 385,270 15.5% 0.91% 1,821,972 15.1% 4.29% Quintile 3 547,730 16.3% 0.91% 3,438,881 21.2% 5.71% Quintile 4 881,742 20.4% 1.22% 4,334,202 20.7% 5.98% Quintile 5 1,629,057 28.2% 1.24% 9,170,943 32.8% 7.00% All HHs 588,846 100.0% 1.14% 2,848,760 100.0% 5.51% Source: Public/Private Transfers and Social Capital Survey,World Bank, 2003. MAPPED IN OR MAPPED OUT? 61 TABLE A4A: MONETARY TRANSFERS (OUTFLOWS) TO PRIVATE ORGANIZATIONS Amount (lei)11 1 2 3 4 5 6 7 8 9 10 11 12 less than 110,000 483 98 65 11 39 24 14 0 6 2 8 1 between 110­510,000 921 200 156 10 26 26 22 11 14 6 12 2 510,000­1,000,000 149 32 64 6 10 3 13 14 12 6 2 4 between 1,1­1,000,000 77 13 26 29 1 5 10 11 10 12 6 5 over 3,000,000 32 5 5 61 2 13 12 13 6 8 0 2 Total 1,662 348 316 117 78 71 71 49 48 34 28 14 Ranking: 1. Church Committee Or Other Forms Of Collective Church Coordination 2. Parents' Committee 3. Trade Union Or Labour Union 4. Agricultural SocietyWith Legal Personality 5. Political Party 6. Other Associations 7. Professional Association 8. Money-Rotating System 9. Artists' / Sports Association 10. Family-Type Agricultural Association 11. NGO Or Civic Group 12. Traders Or Business Association Source: Public/PrivateTransfers and Social Capital Survey,World Bank, 2003. 62 WORLD BANK WORKING PAPER TABLE A6C: URBAN INTER-HOUSEHOLD TRANSACTIONS OUTFLOWS (IN LEI AND PERCENTAGES) Income before Number of Inter-household Inter-household Quintile HHs Transaction Gift Payment Exchange Transaction Q1 150 5,191,064 3,318,928 1,046,765 825,371 32,500,000 Q2 270 6,127,173 4,603,356 1,060,821 462,996 58,000,000 Q3 334 7,364,511 5,375,121 1,505,110 484,280 72,500,000 Q4 334 9,151,397 6,428,573 2,316,658 406,166 91,900,000 Q5 375 20,259,871 14,700,000 4,138,489 1,421,382 176,000,000 All HHs 1,540 10,804,319 7,776,479 2,282,993 744,847 98,400,000 As a Share ofTotal Inter-householdTransactions Q1 100.0% 63.9% 20.2% 15.9% Q2 100.0% 75.1% 17.3% 7.6% Q3 100.0% 73.0% 20.4% 6.6% Q4 100.0% 70.2% 25.3% 4.4% Q5 100.0% 72.6% 20.4% 7.0% All HHs 100.0% 72.0% 21.1% 6.9% As a Share of a Particular Inter-householdTransaction Q1 4.7% 4.2% 4.5% 10.8% 3.2% Q2 9.9% 10.4% 8.1% 10.9% 10.3% Q3 14.8% 15.0% 14.3% 14.1% 16.0% Q4 18.4% 17.9% 22.0% 11.8% 20.3% Q5 45.7% 46.0% 44.1% 46.5% 43.6% All HHs 100.0% 100.0% 100.0% 100.0% 100.0% As a Share of Income before a Particular Inter-householdTransaction Q1 16.0% 10.2% 3.2% 2.5% Q2 10.6% 7.9% 1.8% 0.8% Q3 10.2% 7.4% 2.1% 0.7% Q4 10.0% 7.0% 2.5% 0.4% Q5 11.5% 8.4% 2.4% 0.8% All HHs 11.0% 7.9% 2.3% 0.8% Source: Public/Private Transfers and Social Capital,World Bank, 2003. MAPPED IN OR MAPPED OUT? 63 TABLE A6D: URBAN INTER-HOUSEHOLD TRANSACTIONS INFLOWS (IN LEI AND PERCENTAGES) Income before Number of Inter-household Inter-household Quintile HHs Transaction Gift Payment Exchange Transaction Q1 150 6,037,941 4,099,457 857,698 1,080,786 32,500,000 Q2 270 4,386,233 3,385,134 555,869 445,230 58,000,000 Q3 334 5,193,232 3,635,868 1,039,321 518,043 72,500,000 Q4 334 4,618,732 3,635,868 242,871 739,993 91,900,000 Q5 375 8,154,787 6,301,342 723,859 1,129,586 176,000,000 All HHs 1,540 7,532,794 6,096,711 658,737 777,346 98,400,000 As a Share ofTotal Inter-householdTransactions Q1 100.0% 67.9% 14.2% 17.9% Q2 100.0% 77.2% 12.7% 10.2% Q3 100.0% 70.0% 20.0% 10.0% Q4 100.0% 78.7% 5.3% 16.0% Q5 100.0% 77.3% 8.9% 13.9% All HHs 100.0% 80.9% 8.7% 10.3% As a Share of a Particular Inter-householdTransaction Q1 7.8% 6.5% 12.7% 13.5% 3.2% Q2 10.2% 9.7% 14.8% 10.0% 10.3% Q3 15.0% 12.9% 34.2% 14.5% 16.0% Q4 13.3% 12.9% 8.0% 20.6% 20.3% Q5 26.4% 25.2% 26.8% 35.4% 43.6% All HHs 100.0% 100.0% 100.0% 100.0% 100.0% As a Share of Income before a Particular Inter-householdTransaction Q1 18.6% 12.6% 2.6% 3.3% Q2 7.6% 5.8% 1.0% 0.8% Q3 7.2% 5.0% 1.4% 0.7% Q4 5.0% 4.0% 0.3% 0.8% Q5 4.6% 3.6% 0.4% 0.6% All HHs 7.7% 6.2% 0.7% 0.8% Source: Public/Private Transfers and Social Capital Survey,World Bank, 2003. 64 WORLD BANK WORKING PAPER TABLE A6E: RURAL INTER-HOUSEHOLD TRANSACTIONS OUTFLOWS (IN LEI AND PERCENTAGES) Income before Number of Inter-household Inter-household Quintile HHs Transaction Gift Payment Exchange Transaction Q1 368 4,782,012 2,637,468 1,152,715 991,829 25,600,00 Q2 248 8,090,517 4,885,778 2,348,439 856,300 46,300,000 Q3 184 8,234,901 4,827,455 2,652,025 755,421 68,100,000 Q4 143 13,499,388 7,881,469 3,839,498 1,778,421 78,600,000 Q5 107 20,894,645 8,003,396 11,300,000 1,591,249 147,000,000 All HHs 1,050 8,995,086 4,813,263 3,095,222 1,086,601 57,600,000 As a Share ofTotal Inter-householdTransactions Q1 100.0% 55.2% 24.1% 20.7% Q2 100.0% 60.4% 29.0% 10.6% Q3 100.0% 58.6% 32.2% 9.2% Q4 100.0% 58.4% 28.4% 13.2% Q5 100.0% 38.3% 54.1% 7.6% All HHs 100.0% 53.5% 34.4% 12.1% As a Share of a Particular Inter-householdTransaction Q1 18.6% 19.2% 13.1% 32.0% 15.6% Q2 21.2% 24.0% 17.9% 18.6% 19.0% Q3 16.0% 17.6% 15.0% 12.2% 20.7% Q4 20.4% 22.3% 16.9% 22.3% 18.6% Q5 23.7% 16.9% 37.2% 14.9% 26.0% All HHs 100.0% 100.0% 100.0% 100.0% 100.0% As a Share of Income before a Particular Inter-householdTransaction Q1 18.7% 10.3% 4.5% 3.9% Q2 17.5% 10.6% 5.1% 1.8% Q3 12.1% 7.1% 3.9% 1.1% Q4 17.2% 10.0% 4.9% 2.3% Q5 14.2% 5.4% 7.7% 1.1% All HHs 15.6% 8.4% 5.4% 1.9% Source: Public/Private Transfers and Social Capital,World Bank, 2003. MAPPED IN OR MAPPED OUT? 65 TABLE A6F: RURAL INTER-HOUSEHOLD TRANSACTIONS INFLOWS (IN LEI AND PERCENTAGES) Income before Number of Inter-household Inter-household Quintile HHs Transaction Gift Payment Exchange Transaction Q1 368 4,381,226 1,682,712 1,657,661 1,040,853 25,600,000 Q2 248 5,417,541 2,649,346 1,710,558 1,057,637 46,300,000 Q3 184 5,897,290 2,380,557 2,134,395 1,382,338 68,100,000 Q4 143 7,256,406 2,293,198 3,419,834 1,543,374 78,600,000 Q5 107 12,475,681 4,071,692 5,713,762 2,690,227 147,000,000 All HHs 1,050 6,108,101 2,359,901 2,407,024 1,341,176 57,600,000 As a Share ofTotal Inter-householdTransactions Q1 100.0% 38.4% 37.8% 23.8% Q2 100.0% 48.9% 31.6% 19.5% Q3 100.0% 40.4% 36.2% 23.4% Q4 100.0% 31.6% 47.1% 21.3% Q5 100.0% 32.6% 45.8% 21.6% All HHs 100.0% 38.6% 39.4% 22.0% As a Share of a Particular Inter-householdTransaction Q1 25.1% 25.0% 24.1% 27.2% 15.6% Q2 20.9% 26.5% 16.8% 18.6% 19.0% Q3 16.9% 17.7% 15.5% 18.1% 20.7% Q4 16.2% 13.2% 19.3% 15.7% 18.6% Q5 20.8% 17.6% 24.2% 20.4% 26.0% All HHs 100.0% 100.0% 100.0% 100.0% 100.0% As a Share of Income before Inter-householdTransaction Q1 17.1% 6.6% 6.5% 4.1% Q2 11.7% 5.7% 3.7% 2.3% Q3 8.7% 3.5% 3.1% 2.0% Q4 9.2% 2.9% 4.4% 2.0% Q5 8.5% 2.8% 3.9% 1.8% All HHs 10.6% 4.1% 4.2% 2.3% Source: Public/Private Transfers and Social Capital Survey,World Bank, 2003. 66 WORLD BANK WORKING PAPER TABLE A8A: URBAN NET INFORMAL INTER-HOUSEHOLD TRANSACTIONS Total Income Net Informal before Inter Inter-household Household HouseholdType Transaction Gift Payment Exchanges Transaction Q1 lei 846,877 780,529 -189,068 255,415 32,500,000 # of HHs 148 141 69 77 150 Q2 lei -1,740,940 -1,218,222 -504,952 -17,766 58,000,000 # of HHs 262 256 105 108 270 Q3 lei -2,171,280 -1,739,253 -465,789 33,762 72,500,000 # of HHs 319 311 142 144 334 Q4 lei -1,867,191 -127,232 -2,073,786 333,827 91,900,000 # of HHs 357 348 130 134 375 Q5 lei -7,955,528 -4,249,102 -3,414,630 -291,796 176,000,000 # of HHs 392 386 188 157 411 All HHs lei -3,271,526 -1,679,769 -1,624,256 32,499 98,400,000 # of HHs 1,478 1,442 634 620 1540 As a Share of EachTransaction, by Quintile Q1 % lei -2.5% -4.5% 1.1% 76.5% 3.2% % of HHs 10.0% 9.8% 10.9% 12.4% 9.7% Q2 % lei 9.3% 12.7% 5.5% -9.6% 10.3% % of HHs 17.7% 17.8% 16.6% 17.4% 17.5% Q3 % lei 14.4% 22.5% 6.2% 22.5% 16.0% % of HHs 21.6% 21.6% 22.4% 23.2% 21.7% Q4 % lei 13.9% 1.8% 31.1% 250.1% 22.7% % of HHs 24.2% 24.1% 20.5% 21.6% 24.4% Q5 % lei 64.9% 67.5% 56.1% -239.6% 47.7% % of HHs 26.5% 26.8% 29.7% 25.3% 26.7% All HHs % lei 100% 100% 100% 100% 100% % of HHs 100% 100% 100% 100% 100% As a Share ofTotal Income before a Particular Inter-householdTransaction Q1 % lei 2.6% 2.4% -0.6% 0.8% 100% % of HHs 98.7% 94.0% 46.0% 51.3% 100% Q2 % lei -3.0% -2.1% -0.9% 0.0% 100% % of HHs 97.0% 94.8% 38.9% 40.0% 100% Q3 % lei -3.0% -2.4% -0.6% 0.0% 100% % of HHs 95.5% 93.1% 42.5% 43.1% 100% Q4 % lei -2.0% -0.1% -2.3% 0.4% 100% % of HHs 95.2% 92.8% 34.7% 35.7% 100% Q5 % lei -4.5% -2.4% -1.9% -0.2% 100% % of HHs 95.4% 93.9% 45.7% 38.2% 100% All HHs % lei -3.3% -1.7% -1.7% 0.0% 100% % of HHs 96.0% 93.6% 41.2% 40.3% 100% Source: Public/Private Transfers and Social Capital Survey,World Bank, 2003. MAPPED IN OR MAPPED OUT? 67 TABLE A8B: RURAL NET INFORMAL INTER-HOUSEHOLD TRANSACTIONS Q1 lei -400,785 -954,756 504,946 49,024 25,600,000 # of HHs 356 341 269 248 368 Q2 lei -2,672,976 -2,236,432 -637,881 201,337 46,300,000 # of HHs 244 236 183 164 248 Q3 lei -2,337,611 -2,446,898 -517,630 626,917 68,100,000 # of HHs 177 170 131 103 184 Q4 lei -6,242,983 -5,588,271 -419,664 -235,047 78,600,000 # of HHs 141 136 114 108 143 Q5 lei -8,393,263 -3,931,704 -5,560,537 1,098,978 147,000,000 # of HHs 106 98 78 77 107 All HHs lei -2,886,985 -2,453,362 -688,198 254,575 57,600,000 # of HHs 1,024 981 775 700 1050 As a Share of EachTransaction, by Quintile Q1 lei 4.9% 13.6% -25.7% 6.7% 15.6% # of HHs 34.8% 34.8% 34.7% 35.4% 35.0% Q2 lei 21.9% 21.5% 21.9% 18.7% 19.0% # of HHs 23.8% 24.1% 23.6% 23.4% 23.6% Q3 lei 14.2% 17.5% 13.2% 43.2% 20.7% # of HHs 17.3% 17.3% 16.9% 14.7% 17.5% Q4 lei 29.5% 31.0% 8.3% -12.6% 18.6% # of HHs 13.8% 13.9% 14.7% 15.4% 13.6% Q5 lei 29.6% 16.3% 82.3% 44.0% 26.0% # of HHs 10.4% 10.0% 10.1% 11.0% 10.2% All HHs lei 100% 100% 100% 100% 100% # of HHs 100% 100% 100% 100% 100% As a Share ofTotal Income before a Particular Inter-householdTransaction Q1 % lei -1.6% -3.7% 2.0% 0.2% 100% % of HHs 96.7% 92.7% 73.1% 67.4% 100% Q2 % lei -5.8% -4.8% -1.4% 0.4% 100% % of HHs 98.4% 95.2% 73.8% 66.1% 100% Q3 % lei -3.4% -3.6% -0.8% 0.9% 100% % of HHs 96.2% 92.4% 71.2% 56.0% 100% Q4 % lei -7.9% -7.1% -0.5% -0.3% 100% % of HHs 98.6% 95.1% 79.7% 75.5% 100% Q5 % lei -5.7% -2.7% -3.8% 0.7% 100% % of HHs 99.1% 91.6% 72.9% 72.0% 100% All HHs % lei -5.0% -4.3% -1.2% 0.4% 100% % of HHs 97.5% 93.4% 73.8% 66.7% 100% Source: Public/Private Transfers and Social Capital Survey,World Bank, 2003. 68 WORLD BANK WORKING PAPER TABLE A8E: NET INFORMAL LENDING--URBAN (IN LEI AND PERCENTAGES) As a Share of As a Share of MeanValue of Inter-household Total Income Before HouseholdType Transaction Transaction by Quintile Inter-householdTransaction Q1 lei -33,267 2.3% -0.1% # of HHs 82 19.2% 54.7% Q2 lei 2,778 -0.3% 0.0% # of HHs 147 20.1% 54.4% Q3 lei 466,916 -72.7% 0.6% # of HHs 169 19.0% 50.6% Q4 lei -645,547 112.8% -0.7% # of HHs 198 20.2% 52.8% Q5 lei -302,350 57.9% -0.2% # of HHs 231 21.5% 56.2% All HHs lei -139,374 100% -0.1% # of HHs 827 100% 53.7% Urban Informal Lending (Outflows and Inflows) Outflows Inflows As a Share As a Share As a Share of Income As a Share of Income of an Inter- before of an Inter- before household Inter- household Inter- # of Loan Transaction household # of Loan Transaction household Quintile HHs Amount by Quintile Transaction HHs Amount by Quintile Transaction Q1 150 1,327,667 4.2% 4.1% 150 1,294,400 4.3% 4.0% Q2 270 1,530,556 8.7% 2.6% 270 1,533,333 9.1% 2.6% Q3 334 1,609,281 11.3% 2.2% 334 2,076,198 15.3% 2.9% Q4 334 2,609,093 18.4% 2.8% 334 1,963,547 14.5% 2.1% Q5 375 6,356,000 50.3% 3.6% 375 6,053,650 50.2% 3.4% All HHs 1,540 3,078,329 100.0% 3.1% 1,540 2,938,955 100.0% 3.0% Source: Public/Private Transfers and Social Capital Survey,World Bank, 2003. MAPPED IN OR MAPPED OUT? 69 TABLE A8F: NET INFORMAL LENDING--RURAL (IN LEI AND PERCENTAGES) As a Share of As a Share of MeanValue of Inter-household Total Income before HouseholdType Transaction Transaction by Quintile Inter-householdTransaction Q1 lei -224,389 22.9% -0.9% # of HHs 181 33.5% 49.2% Q2 lei -301,331 20.7% -0.7% # of HHs 128 23.7% 51.6% Q3 lei -128,370 6.5% -0.2% # of HHs 91 16.8% 49.5% Q4 lei 520,874 -20.7% 0.7% # of HHs 78 14.4% 54.5% Q5 lei -2,376,168 70.5% -1.6% # of HHs 63 11.6% 58.9% All HHs lei -343,514 100% -0.6% # of HHs 541 100% 51.5% Rural Informal Lending (Outflows and Inflows) Outflows Inflows As a Share As a Share As a Share of Income As a Share of Income of an Inter- before of an Inter- before household Inter- household Inter- # of Loan Transaction household # of Loan Transaction household Quintile HHs Amount by Quintile Transaction HHs Amount by Quintile Transaction Q1 368 761,182 14.2% 3.0% 368 536,794 12.3% 2.1% Q2 248 1,439,315 18.1% 3.1% 248 1,137,984 17.5% 2.5% Q3 184 1,242,120 11.6% 1.8% 184 1,113,750 12.7% 1.6% Q4 143 1,493,986 10.8% 1.9% 143 2,014,860 17.9% 2.6% Q5 107 8,335,047 45.2% 5.7% 107 5,958,879 39.6% 4.1% All HHs 1,050 1,877,243 100.0% 3.3% 1,050 1,533,729 100.0% 2.7% Source: Public/Private Transfers and Social Capital Survey,World Bank, 2003. 70 WORLD BANK WORKING PAPER TABLE A9: SELECTED CHARACTERISTICS OF ROMANIAN HOUSEHOLDS BY PRIVATE TRANSFER STATUS Number Percentage Households Giving Only 381 14.70% Households Giving Only (urban) 276 17.47% Households Giving Only (rural) 105 10.38% Households Receiving Only 42 1.62% Households Receiving Only (urban) 32 2.03% Households Receiving Only (Rural) 10 0.99% Households Both Giving and Receiving 2103 81.13% Households Both Giving and Receiving (urban) 1218 77.09% Households Both Giving and Receiving (rural) 885 87.45% Households Neither Giving Nor Receiving 66 2.55% Households Neither Giving Nor Receiving (urban) 54 3.42% Households Neither Giving Nor Receiving (rural) 12 1.19% Total 2592 100% Urban 1580 100% Rural 1012 100% NetTransfer Donors 1545 59.61% Urban 912 57.72% Rural 633 62.55% NetTransfer Recipients 963 37.15% Urban 605 38.29% Rural 358 35.38% NetTransfer Equals Zero (Others) 84 3.24% Urban 63 3.99% Rural 21 2.08% Total 2592 100% Urban 1580 100% Rural 1012 100% MAPPED IN OR MAPPED OUT? 71 TABLE A9: SELECTED CHARACTERISTICS OF ROMANIAN HOUSEHOLDS BY PRIVATE TRANSFER STATUS (CONTINUED) NetTransfer NetTransfer WelfareVariables All Households Donors Recipients Others Total Household Income 67,200,000 69,500,000 64,300,000 59,700,000 (surs1--99) mean in lei Urban 83,200,000 87,700,000 77,800,000 67,900,000 Rural 42,400,000 43,100,000 41,500,000 35,200,000 MIG Received (lei) 822,998 736,669 981,362 595,298 Urban 719,275 622,092 927,441 127,064 Rural 984,936 901,746 1,072,486 2,000,000 Non-MIG Received (lei) 1,176,274 873,120 1,342,724 4,843,929 Urban 1,448,751 1,053,869 1,538,205 6,306,103 Rural 750,866 612,704 1,012,372 457,409 Consumption (per adult 3.60 3.53 3.71 3.60 per day in $)(mean) Urban 4.29 4.28 4.32 4.23 Rural 2.52 2.46 2.69 1.70 Assets (number of 9.20 9.37 8.94 8.83 durable goods) Urban 10.5 10.75 10.2 9.9 Rural 7.16 7.39 6.82 5.62 Satisfaction of 4.06 4.16 3.93 3.76 Financial Situation (1­10) Urban 4.13 4.27 3.94 4.05 Rural 3.95 4 3.93 2.9 Percentage of in 55.07% 56.33% 52.45% 61.90% good health Urban 61.45% 63.56% 58.37% 60.32% Rural 45.09% 45.87% 42.46% 66.67% HH Characteristics Age of the Subject 52.23 52.12 52.21 54.49 Urban 50.56 51.02 49.47 54.44 Rural 54.83 53.70 56.83 54.62 Percentage of Female 15.93% 13.46% 20.46% 9.52% Headed HH Urban 15.32% 14.14% 17.85% 7.94% Rural 16.90% 12.48% 24.86% 14.29% Percentage of HH with 59.10% 59.09% 58.77% 63.10% Pensioner Present Urban 53.61% 54.93% 51.07% 58.73% Rural 67.69% 65.09% 71.79% 76.19% HH size (number of Individuals) 3.03 3.12 2.91 2.9 Urban 3.00 3.05 2.96 2.81 Rural 3.08 3.21 2.84 3.19 (Continued) 72 WORLD BANK WORKING PAPER TABLE A9: SELECTED CHARACTERISTICS OF ROMANIAN HOUSEHOLDS BY PRIVATE TRANSFER STATUS (CONTINUED) NetTransfer NetTransfer WelfareVariables All Households Donors Recipients Others Multigenerational 18.09% 18.12% 17.86% 20.24% Urban 14.75% 15.13% 14.21% 14.29% Rural 23.32% 22.43% 24.02% 38.10% Number of Children (under 18) 0.61 0.63 0.61 0.38 Urban 0.58 0.57 0.61 0.38 Rural 0.66 0.70 0.61 0.38 Social Capital Percentage of trustpeop =1 37.03% 36.78% 37.01% 41.67% Urban 36.08% 36.26% 35.27% 41.27% Rural 38.52% 37.54% 40.00% 42.86% Percentage of trustnei =1 57.98% 58.54% 57.39% 54.32% Urban 60.51% 61.29% 59.72% 56.67% Rural 54.11% 54.65% 53.54% 47.62% Percentage of 65.13% 65.42% 65.30% 57.69% helppoor =1(cs2_c =1or2) Urban 64.65% 64.71% 65.54% 55.17% Rural 65.85% 66.39% 64.91% 65.00% Relation (average of cs5) 0.209 0.211 0.210 0.156 Urban 0.193 0.196 0.192 0.163 Rural 0.233 0.233 0.239 0.133 Number of close friends (cs6) 8.208 8.396 8.086 6.159 Urban 7.669 8.075 7.293 5.452 Rural 9.067 8.863 9.479 8.35 Amount of Help (no. of Yes toWS1­WS6) 1.838 1.864 1.853 1.19 Urban 2.062 2.13 2.031 1.365 Rural 1.488 1.48 1.55 0.667 Collective Action and Cooperation Cooperation(alpha index of ac5) 0.0013 0.0047 0.0006 -0.0534 Urban 0.0079 0.0103 0.0117 -0.0625 Rural -0.0090 -0.0034 -0.0181 -0.0261 Groups and Networks Number of memberships 1.076 1.0460 1.0620 1.7857 in different org. Urban 1.2076 1.1732 1.1802 1.9683 Rural 0.8706 0.8626 0.8631 1.2381 Education of the HH subject No education 1.31% 1.23% 1.35% 2.38% Urban 0.63% 0.88% 0.33% 0.00% Rural 2.37% 1.74% 3.07% 9.52% MAPPED IN OR MAPPED OUT? 73 TABLE A9: SELECTED CHARACTERISTICS OF ROMANIAN HOUSEHOLDS BY PRIVATE TRANSFER STATUS (CONTINUED) NetTransfer NetTransfer WelfareVariables All Households Donors Recipients Others Primary + Secondary School 31.63% 31.28% 31.95% 34.52% Urban 16.87% 15.81% 17.58% 25.40% Rural 54.64% 53.55% 56.15% 61.90% Professional School 16.61% 17.03% 16.23% 13.10% Urban 17.82% 18.00% 17.91% 14.29% Rural 14.72% 15.64% 13.41% 9.52% High School 28.58% 28.56% 28.82% 26.19% Urban 33.29% 33.59% 33.33% 28.57% Rural 21.25% 21.33% 21.23% 19.05% Post High School and Above 21.95% 21.94% 21.81% 23.81% Urban 31.52% 31.80% 31.07% 31.75% Rural 7.02% 7.74% 6.15% 0.00% Transfers NetTransfer Donors 59.61% 100.00% 0.00% 0.00% Urban 57.72% 100.00% 0.00% 0.00% Rural 62.55% 100.00% 0.00% 0.00% NetTransfer Receivers 37.15% 0.00% 100.00% 0.00% Urban 38.29% 0.00% 100.00% 0.00% Rural 35.38% 0.00% 100.00% 0.00% Others 3.24% 0.00% 0.00% 100.00% Urban 3.99% 0.00% 0.00% 100.00% Rural 2.08% 0.00% 0.00% 100.00% GivingTransfer Only 14.70% (328) 21.23% (52) 5.40% (1) 1.19% Urban 17.47% (253) 27.74% (23) 3.80% (0) 0.00% Rural 10.38% (75) 11.85% (29) 8.10% (1) 4.76% ReceivingTransfer Only 1.62% (4) 0.26% (38) 3.95% (0) 0% Urban 2.03% (1) 0.11% (31) 5.12% (0) 0% Rural 0.99% (3) 0.47% (7) 1.96% (0) 0.00% Both Receiving and Giving 81.13% (1213) 78.51% (873) 90.65% (17) 20.24 Urban 77.09% (658) 72.25% (551) 91.07% (9) 14.29% Rural 87.45% (555) 87.68% (322) 89.94% (8) 38.10% Neither Receiving Nor Giving 2.55% (0) 0.00% (0) 0% (66) 78.57 Urban 3.42% (0) 0% (0) 0.00% (54) 85.71% Rural 1.19% (0) 0% (0) 0.00% (12) 57.14% GrossTransfers Given (lei) 12,700,000 14,400,000 11,000,000 843,095 Urban 13,800,000 15,900,000 12,100,000 701,587 Rural 11,000,000 12,300,000 9,128,058 1,267,619 GrossTransfers Received (lei) 9,441,074 5,819,674 16,000,000 620,476 Urban 10,600,000 5,205,713 19,900,000 576,191 Rural 7,568,862 6,704,244 9,497,435 753,333 (Continued) 74 WORLD BANK WORKING PAPER TABLE A9: SELECTED CHARACTERISTICS OF ROMANIAN HOUSEHOLDS BY PRIVATE TRANSFER STATUS (CONTINUED) NetTransfer NetTransfer WelfareVariables All Households Donors Recipients Others NetTransfers (lei) -1,257,341 -10,100,000 12,800,000 0 Urban -469,971 -11,400,000 15,900,000 0 Rural -2,486,633 -8,266,835 7,587,803 0 Sample Size (100%) 2592 (100%) 1545 (100%) 963 (100%) 84 Urban (100%) 1580 (100%) 912 (100%) 605 (100%) 63 Rural (100%) 1012 (100%) 638 (100%) 358 (100%) 21 Note: In 2002, the average exchange rate was 33,055.40 lei per US dollar. Source: Public/Private Transfers and Social Capital Survey,World Bank, 2003. APPENDIX B MULTIVARIATE ANALYSES Table B1 presents multivariate tests of determinants of gross inflows from inter-household transactions. Inflows include gifts or loans received, and payment in cash or in kind for goods and services provided. In equation 1, the dependent variable is inflows in millions of lei.13 Number of adults in the household is significantly associated with reduced inflows in equation 1. This finding has a highly intuitive explanation. Many inter-household transactions, particularly for gifts or loans, occur across generations of the same family. Where they are in the same household already, any such transactions will not show up in the data. Number of children is associated with higher inflows, although this relationship is only of marginal statistical significance. Age (of respondent) is related to inter-household transfers in the usual way. As age increases, gross inflows fall and then eventually rise again (beyond about age 67). Higher income-earners and wealthier households (measured by types of assets owned) have significantly higher inflows, controlling for other variables. Landowners have higher inflows, while homeowners had somewhat lower inflows.14 MIG assistance (cash benefits, means-tested heating subsidies, and emergency relief) is positively but not significantly related to inflows. However, other social assistance income is strongly associated with higher inflows. These results are consistent with the possibility that public assistance does not "crowd out" private transfers, or other income from inter-household transactions. However, the regression coefficients could be capturing both a (negative) "crowd out" effect and a (positive) effect of otherwise unobserved characteristics associated with need. 13. Because the dependent variable is truncated at 0, and there are quite a few 0 values (447 households have 0 gross inflows), we use tobit regression. T-statistics are in parentheses below the corresponding regression coefficients. 14. In other tests, number of hectares owned had no relationship to inflows (or outflows). 75 76 WORLD BANK WORKING PAPER Only by controlling fully for a household's need for private assistance, with variables other than MIG assistance, could we confidently attribute the MIG coefficient to the effects of "crowd out" or absence of "crowd out." The presence of a pensioner in the household is associated with lower inflows, at least in urban areas. Rural residence makes no difference for households without pensioners. However, rural households with pensioners receive significantly higher inflows, relative to rural households without a pensioner or to urban households with pensioners. (Rural pensioner is an interaction term equal to the product of the two dummy variables "rural" and "pensioner.") This result is consistent with the fact that most pensioners in rural areas receive CAP pensions, which are far less lucrative than the standard state old age pension received by most pensioners in urban areas. A "public activism" index was constructed from five questions on attending public meetings, participating in protests, participating in election meetings, alerting media to a local problem, and notifying the police or courts about a local problem. Activists are likely to be better integrated socially into the community, and are also likely to have a stronger sense of initiative. Therefore, this index could be associated with higher inflows and outflows. To the extent that activism reflects altruism, it could be associated more strongly with outflows than with inflows. Equation 1 (Table B1) shows that households with civic activists have higher inflows than other households. Equation 2 analyzes the determinants of whether or not a household receives positive gross inflows, while equation 3 analyzes the level of inflows only for those households with positive inflows. The dependent variable in equation 2 takes on the value 0 for households reporting no inflows, and the value 1 for those reporting some inflows (82.7 percent of the households in the sample). Probit regression is therefore used. Coefficients in the table indicate marginal effects evaluated at the means of all other independent variables. An additional adult in the household reduces the likelihood of receiving some inflows by 3 percentage points. Age affects the probability of receiving inflows in the same curvilinear fashion as displayed in equation 1. Income, assets, and owning a home have no impact. Landowners are more likely to receive positive inflows. Social assistance, including MIG, has no effect. Pensioners reduce the probability of a household receiving inflows by 6 percentage points. Equation 3 analyzes, using OLS, the determinants of inflows conditional on receiving positive inflows. The sample for this regression therefore excludes the 447 households reporting 0 inflows. Number of adults reduces inflows. The effect of age is curvilinear as in equations 1 and 2. The amount of inflows increases with income, assets, and land ownership, and decreases with home ownership. Pensioners are found to reduce the size of inflows in equation 3, as they did the likelihood of inflows in equation 2. Rural residence is unrelated to the size of inflows for non- pensioners, but rural pensioners have significantly larger inflows, as do public activists.15 Table B2 shows the results of similar tests of the determinants of outflows, measured by gifts and loans provided, and by cash and in-kind payments for goods and services received. Equations 1-3 are perfectly analogous to the same-numbered equations in Table B1. Number of adults and number of children are related to outflows in Table B2 (equation 1) in the same way they were to inflows in Table B1. The most striking difference between Tables 1 and 2 is the lack of any significant effect of age on outflows. Income, assets and land ownership are positively related to outflows, as they were to inflows. Home ownership is negatively related to outflows in Table B2, as it was to inflows in Table B1. Social assistance other than MIG is positively related to outflows. Outflows are lower for households with pensioners. Outflows (but not inflows, in Table B1) are significantly higher for rural households, particularly for those with pensioners. Public activism is associated with higher outflows, as it is for inflows. 15. Activism does not have discernible "external" effects on inter-household transactions: community- level means of activism were insignificant when added to any of the regressions in Table 1. MAPPED IN OR MAPPED OUT? 77 TABLE B1: INTER-HOUSEHOLD TRANSACTIONS GROSS INFLOWS REGRESSIONS Equation 1 2 3 Transfers Gross Gross Gross Variable Inflows Inflows > 0 Inflows (if > 0) Method Tobit Probit OLS Intercept -16.306 -- -25.097 (-1.41) (-1.60) Number of adults in household -3.022 -.0297 -2.318 (-5.11) (-2.87) (-3.68) Number of children 1.015 .0151 0.556 (1.62) (1.35) (0.91) Age of subject -0.897 -.0087 -0.720 (-4.07) (-2.50) (-4.59) Age squared 0.006 .0001 0.005 (3.07) (1.78) (3.96) Log of income (excl. transfers) 2.988 -.0189 3.268 (4.66) (-1.47) (3.11) Asset index 0.471 -.0003 0.624 (3.13) (-0.09) (3.44) Owns land 5.333 .0478 4.126 (4.18) (2.21) (2.47) Owns home -2.688 -.0154 -2.498 (-1.75) (-0.70) (-1.74) MIG cash income 0.186 .0031 0.150 (1.60) (1.16) (1.78) Other social assistance 0.362 -.0009 1.086 (6.38) (-1.24) (1.88) Pensioner in household -4.452 -.0579 -3.047 (-2.28) (-2.30) (-2.39) Rural -0.821 .0516 -2.144 (-0.53) (1.54) (-1.33) Rural pensioner 5.033 .0339 3.543 (2.19) (0.93) (2.42) Public activism index 2.074 .0156 2.062 (2.45) (1.24) (1.95) Regression stat. Chi2=249.7 chi2=81.2 R2=.15 N 2590 2590 2143 All dependent variables are in millions of lei.T or Z statistics are in parentheses. Probit coefficients are marginal effects evaluated at mean of all other regressors. Source: Public/Private Transfers and Social Capital,World Bank, 2003. 78 WORLD BANK WORKING PAPER TABLE B2: INTER-HOUSEHOLD TRANSACTIONS GROSS OUTFLOWS AND NET INFLOWS REGRESSIONS Equation 1 2 3 4 Transfers Gross Gross Gross Net Variable Outflows Outflows > 0 Outflows Inflows (if > 0) Method Tobit Probit OLS OLS Intercept -78.485 -- -74.501 52.389 (-5.78) -- (-3.20) (3.39) Number of adults in household -3.236 -.0014 -3.237 0.967 (-4.74) (-0.43) (-3.67) (1.07) Number of children 1.335 .0029 1.227 -0.567 (1.83) (0.75) (1.22) (-0.62) Age of subject 0.128 .0004 0.140 -0.848 (0.50) (0.29) (0.70) (-3.93) Age squared -0.002 -.0001 -0.002 0.007 (-.62) (-0.57) (-0.85) (3.69) Log of income (excl. transfers) 4.720 .0026 4.576 -1.470 (6.29) (0.80) (3.01) (-1.39) Asset index 1.387 .0029 1.338 -0.863 (7.96) (2.86) (3.49) (-2.38) Owns land 3.085 .0146 2.480 1.304 (2.09) (1.43) (1.93) (0.87) Owns home -3.662 .0055 -3.984 1.533 (-2.04) (0.51) (-2.29) (0.96) MIG cash income 0.104 .0001 0.100 0.049 (0.77) (0.13) (1.45) (0.56) Other social assistance 0.158 -.0005 0.567 0.187 (2.31) (-2.85) (3.48) (0.80) Pensioner in household -4.584 -.0245 -3.416 0.991 (-2.04) (-2.22) (-2.53) (0.93) Rural 3.620 .0276 3.039 -4.701 (2.00) (2.25) (1.14) (-1.68) Rural pensioner 4.187 .0147 2.939 0.478 (1.58) (1.06) (1.35) (0.19) Public activism index 2.320 .0026 2.366 -0.630 (2.35) (0.39) (1.87) (-0.62) Regression statistic chi2=257.5 chi2=156.2 R2=.10 R2=.02 N 2590 2590 2482 2590 All dependent variables are in millions of lei.T or Z statistics are in parentheses.A ** and * indicate significance at .01 and .05 respectively for 2-tailed tests. Probit coefficients are marginal effects evaluated at mean of all other regressors. Source: Public/Private Transfers and Social Capital,World Bank, 2003. MAPPED IN OR MAPPED OUT? 79 The likelihood of positive gross outflows (equation 2) is higher for rural households and for households with more assets, and is lower for households with pensioners or which receive social assistance other than MIG. Equation 3 analyzes the level of outflows, for the 2,482 households (all but 108) with positive outflows. Outflows increase with income, assets, landowning, public activism, and receipts of non-MIG social assistance. They decrease with number of adults in the household, home ownership, and pensioners in the household. Equation 4 of Table B2 analyzes net inflows using OLS. The dependent variable is gross inflows minus gross outflows. While gross inflows and outflows are a measure of involvement in inter-household transactions, net inflows are more a measure of transfers: where net inflows are high, households are getting more than they are giving. Most studies of private transfers in other countries have found they redistribute income in a progressive manner, i.e. from richer to poorer households. Equation 4, however, shows that, controlling for other determinants of net inflows, income is unrelated to net inflows: private transfers are distribution-neutral. Asset ownership is significantly related to lower net inflows in equation 4, showing some evidence of progressivity. Net inflows are lower for rural than for urban households, however. Age has its commonly- observed quadratic pattern in equation 4, indicating transfers in net are from the middle-aged to the young and old. Net inflows are unrelated to receipt of MIG or other social assistance. This result suggests no "crowding in" or "crowding out" of private transfers by public assistance, but we cannot rule out "crowd out" effects for the reasons explained above.16 Table B3 shows determinants of MIG assistance (cash benefits, means-tested heating subsidies, and emergency relief), in millions of lei. Tobit regression is used because the dependent variable is truncated at 0. Only 424 of the 2,521 households in the sample received MIG assistance. Social assistance, inter-household transfers and local revenues per capita are all in millions of lei. Equation 1 analyzes the determinants of MIG assistance for all households, urban and rural. Equations 2 and 3 respectively divide the sample into urban and rural sub-samples. Equations 4 and 5 include all households, but separate MIG assistance into its two main components--cash benefits (equation 4) and heating subsidies (equation 5). In all equations, MIG assistance is unrelated to the volume of inter-household transfers: neither inflows nor outflows are significantly associated with MIG. Net inflows (inflows minus outflows) are also unrelated to MIG, when substituted (in results not shown) for inflows and outflows. Potentially, inflows converted to assets could still reduce MIG assistance through the significant assets variable in the regression. However, the inter-household transactions variables all remain insignificant when the assets variables are omitted from the model. Further tests not reported in the table divided urban from rural households, and found no evidence in either sub- sample that inter-household transactions affected MIG assistance. These results are consistent with the possibility that private transfers do not "crowd out" public assistance, neither by reducing the likelihood a household applies for MIG nor by affecting its eligibility. However, these coefficients could be capturing both a (negative) "crowd out" effect and the (positive) effect of otherwise unobserved characteristics associated with need. Only if we could control fully for a household's need for public assistance, with variables other than inter- household transfers, could we confidently attribute the inter-household transfer coefficients to the effects of "crowd out" or absence of "crowd out." Age (of respondent) is also unrelated to MIG assistance in all equations in Table B3 (and remains insignificant when a linear function of age is substituted for the quadratic). Households with more children receive significantly more MIG benefits, controlling for other variables. This result holds for the full sample (equation 1), for urban households (equation 2), for rural 16. Results in these tables are not sensitive to outliers. Dropping the most extreme cases of reported inflows and outflows ­ some of which seem implausibly high ­ does not materially alter any findings reported here. TABLE B3: MIG TRANSFERS REGRESSIONS Equation 1 2 3 4 5 Sample All Urban Rural All All Heating MIG category All All All Cash benefits Subsidies Intercept 4.513 0.061 7.163 -14.072 -0.826 (0.72) (0.01) (0.46) (-1.84) (-0.36) Gross inter-hh inflows 0.010 0.006 0.046 0.009 0.003 (1.17) (1.15) (0.66) (0.95) (0.93) Gross inter-hh outflows -0.019 -0.010 -0.151 -0.005 -0.011 (-1.21) (-1.03) (-1.19) (-0.32) (-1.29) Age of subject 0.055 0.122 -0.351 -0.015 0.045 (0.36) (1.08) (-0.80) (-0.09) (0.79) Age squared -0.001 -0.001 0.002 -0.001 -0.001 (-0.39) (-0.93) (0.55) (-0.23) (-0.53) Number of children 2.188 1.568 2.728 1.945 0.582 (5.01) (4.82) (2.27) (4.11) (3.57) Log of income (excl. transfers) -1.044 -0.667 -1.131 -0.230 -0.264 (-4.06) (-2.75) (-1.95) (-0.70) (-2.81) MIG-relevant Assets -1.354 -0.809 -1.858 -1.220 -0.371 (-4.22) (-3.56) (-1.82) (-3.35) (-3.06) Non-MIG-relevant assets -0.188 -0.099 -0.973 -0.251 -0.155 (-0.92) (-0.67) (-1.55) (-1.08) (-2.01) Owns land -2.410 -1.089 -4.699 -1.460 -0.988 (-2.38) (-1.46) (-1.64) (-1.28) (-2.57) Locally-raised revenues p.c. 5.082 2.620 3.154 3.840 1.508 (3.85) (2.65) (0.54) (2.66) (3.05) Public activism (locality mean) 6.962 7.751 8.295 2.122 2.978 (2.41) (2.81) (1.24) (0.67) (2.48) Tenure in office of mayor 0.834 0.336 1.463 0.082 0.312 (6.54) (3.27) (3.50) (0.57) (6.20) PSD mayor 2.086 0.302 5.099 -0.452 0.988 (2.35) (0.43) (1.87) (-0.45) (2.88) Poor influence local decisions 1.865 0.148 1.234 -0.842 0.705 (2.79) (0.20) (0.79) (-1.11) (2.50) Percent Roma -74.327 -44.445 -91.692 5.184 -20.005 (-3.78) (-1.28) (-2.27) (0.25) (-2.30) Rural 0.045 -- -- 1.838 -2.595 (0.03) (1.20) (-4.58) pseudo R2 .04 .05 .05 .03 .10 Observations 2521 1529 992 2521 2521 Observations > 0 424 299 125 210 250 Mean, dep. var. 0.819 0.699 1.001 0.451 0.159 Method is tobit regression. Dependent variable is MIG assistance received, in millions of lei. Inter-household transfers and local government revenues are also measured in millions of lei.T statistics are in parentheses. Source: Public/Private Transfers and Social Capital,World Bank, 2003. MAPPED IN OR MAPPED OUT? 81 households (equation 3), and separately for MIG cash benefits (equation 4) and heating subsidies (equation 5). Benefits are supposed to be based in part on number of children, so these findings are unsurprising, although still reassuring. Higher income (per adult equivalent, measured exclusive of inter-household transactions and social assistance) is associated with significantly lower MIG receipts, for the full sample (equation 1), for urban households (equation 2), and rural households (equation 3). Surprisingly, MIG cash benefits are unrelated to income (equation 4), although heating subsidies are higher for lower-income households (equation 5). Households with more assets also receive lower MIG benefits. Asset types were divided into two categories: 1) goods that are potentially income-producing, or luxury goods, and are generally taken into account when MIG administrators evaluate applicants; and 2) other assets that generally are not considered.17 As expected, the first type of asset is more strongly associated with reduced MIG benefits than the second type. Land ownership also reduces MIG benefits.18 The coefficients on income and assets (including land) are higher for the rural sub-sample than for the urban sub- sample, suggesting better targeting in rural areas. Officials in rural areas, despite more limited administrative capacity for investigating applicants, might have more accurate information on their standard of living. Although there are sizeable earmarked transfers from central government for social assistance, the revenue measure most strongly associated with higher MIG benefits is locally-raised revenues per capita. This variable is significant in four of the five tests (equation 3 for rural households is the exception). Localities are expected to cover about 20 percent of the cost of MIG from local revenues. There is wide variation in locally raised revenues, however, and many localities-- particularly smaller and less wealthy localities which are able to raise fewer revenues locally--do not even come close to covering their 20 percent share of costs. Public activism at the local level could be associated with improved accountability of local government, which must consider the possibility that citizens will protest in various ways if services are inadequate. To the extent local officials have control over MIG funds and implementation, households residing in communities with greater activism may receive higher MIG assistance. A household's own activism matters, however, only to the degree it contributes to the "public good" of monitoring local government. Therefore, a household's own level of activism should be unrelated to MIG assistance, controlling for the mean community level. The household's own level of civic activism turned out to be unrelated to MIG assistance, as expected, and this variable was omitted from the models reported in the tables for space reasons. The community level mean of the index, however, has a positive and significant (in equations 1, 2 and 5) coefficient. Number of years the mayor has been in office is positively and significantly related to MIG assistance (equation 1). More experienced mayors may be more effective in lobbying higher levels of government for transfers to local government budgets. However, this variable remains significant when those transfers are controlled for. More experienced mayors may administer social assistance programs more effectively, or, alternatively, those who manage to run more successful programs may increase their chances of re-election. Mayoral tenure is positive and significant in the urban (equation 2) and rural (equation 3) sub-samples, and for heating subsidies (equation 5), but not for cash benefits (equation 4). 17. The first group includes cars, vans, motorcycles, agricultural equipment, animals, CD players, cell phones, refrigerators, freezers, microwave ovens, computers and internet service, and color television. The second group includes radios, tape players and stereo systems, vacuum cleaners, telephones, cookers and stoves, black and white television, cable TV, video players, book collections, washing machines, sewing machines, and bicycles. 18. In additional tests, home ownership was found to have no impact. 82 WORLD BANK WORKING PAPER Households residing in localities with PSD mayors receive significantly higher MIG assistance (equation 1). This result holds for households in rural localities (equation 3), where limited locally-raised revenues make town halls more dependent on transfers from central and county government, which is controlled by the PSD. The result does not hold for urban areas, which are less dependent on such transfers. However, the PSD effect remains when transfers from central and county government are controlled for (in additional tests not reported in the table), and those transfers are not significant predictors of MIG benefits received by households. It is therefore somewhat of a mystery why MIG benefits are higher in PSD-governed localities. Residents of peripheral villages are often thought to be disadvantaged politically, relative to residents of communal centers, where the town hall is located. In tests not reported in the table, no difference was found, however, between MIG assistance levels in central and peripheral villages. Where poor people have more influence over local government policy, it is natural to expect public assistance to be more generous. A survey of public officials included a question asked about the level of influence poor people (and various other groups) exercised over decisions by the town hall and local council. Where poor people were judged to have more influence, MIG benefits are higher (equation 1). This variable is not significant, however, when the sample is broken down into urban and rural sub-samples (equations 2 and 3). It is a significant predictor of heating subsidies (equation 5), but not of cash benefits (equation 4). Several studies, mostly based on U.S. data, have found that support for redistribution and provision of public goods is lower in more ethnically heterogeneous communities. In the 51 localities represented in this study, the Roma population in the last census varied from 0 to 11.7 percent, averaging 1.9. The effect of Roma on MIG assistance could be positive (if they tend to be poorer, and their poverty is not fully captured by the other regressors) or negative (if there is less support for assistance where more of it is likely to go to a different ethnic group). Table B3 (equation 1) shows that localities with a higher share of Roma have significantly lower MIG assistance (equation 1). This result is stronger for the rural sub-sample (equation 3) than for the urban sub-sample (equation 2). Moreover, the negative effect of percent Roma holds only for heating subsidies (equation 5), and not for cash assistance (equation 4), when MIG assistance is divided into those two components. In tests not reported in the table, percent Hungarian population (which varies from 0 to 99.3 percent, averaging 10 percent in the 51 localities) showed no consistent relationship with MIG assistance. It is possible that discrimination could occur within communities. For example, independently of the ethnic composition of the locality in which they live, Roma households could receive lower MIG benefits, controlling for income, assets, and so on. Unfortunately, there is no way to identify Roma households in the data. Hungarian households can be identified, however. Hungarian ethnicity does not significantly lower a household's MIG benefits, even in overwhelmingly non- Hungarian localities. Controlling for the effects of other variables, cash benefits are somewhat higher for rural households (equation 4), but heating subsidies are larger for urban households (equation 5). The bottom row of the table shows the means of the dependent variables. The average MIG assistance for all households is 819 thousand lei per month (equation 1), but most households receive 0; among the 424 households receiving MIG benefits, the average is 4.87 million. The average is higher for rural than for urban households: 1.001 million compared to 699 thousand. For the full sample, cash benefits averaged 451 thousand (equation 4), and heating subsidies averaged 159 thousand (equation 5). To summarize, there is very little evidence in these tests that the benefits to the poor from inter-household transactions are offset by accompanying reductions in their public assistance benefits. These tests are not conclusive, however, as they cannot fully control for factors that may affect either eligibility for MIG or gifts and informal loans received. There is some reassuring evidence that MIG works as planned: households with more children, lower incomes, fewer luxury assets or assets with income-producing potential, receive more assistance. Benefits also tend to be MAPPED IN OR MAPPED OUT? 83 TABLE B4: SOCIAL CAPITAL, ETHNIC FRACTIONALIZATION,AND LOCAL GOVERNMENT PERFORMANCE Client Satisfaction Trust in the Mayor DependentVariable 1 2 3 4 Intercept 28.4 119.2 1.65 6.06 (0.40) (1.92) (0.35) (1.45) Expenditures per capita 1.38 1.35 0.02 -0.01 (3.29) (3.69) (0.57) (-0.38) Log of locality population -2.20 -2.02 -0.92 -0.12 (-2.52) (-2.40) (-1.89) (-2.12) Log of mean locality income 3.32 -1.46 0.74 -0.07 (0.77) (-0.38) (0.28) (-0.27) Neighbor relations index 59.9 3.44 (3.17) (2.68) Income inequality -8.34 (-3.25) Ethnic fractionalization -14.1 -.87 (-2.06) (-2.14) R2 .46 .33 .29 .21 Mean, dep. var. 76.3% 2.88 Sample size is 50.T-ratios are in parentheses. Source: Public/Private Transfers and Social Capital,World Bank, 2003. higher where there is more civic activism, and where the poor have more influence over local political decision-making. More unsettling results, however, are the lower level of benefits in localities that raise fewer revenues locally, and higher benefits in localities with mayors from the PSD or who have been in office longer, suggesting that political factors influence allocations. Most disturbing of all, perhaps, is the finding that MIG assistance is lower in communities with a higher share of Roma in the population. APPENDIX C SAMPLE AND SAMPLE METHODOLOGY The study used qualitative and quantitative methods to collect community and household-level data. During the preparatory stage, three focus groups and five open-ended interviews were conducted with rural and urban poor, as well as with public and private service providers. During the second stage, the following surveys were carried out: a household-level survey and a local officials survey. Seventeen focus groups and individual semi-structured interviews were conducted with poor and non-poor rural and urban inhabitants, local officials, and public and private service providers, as outlined below. A locality card was filled for each locality enrolled in the sample. The card contained social, demographic, and economic data as well as specific information about budgets and social services provision. The Household Survey Sample size: 2,641 households. Sample type: stratified, probabilistic, three-stage sample. Stratification criteria: 18 geographic areas based on historical regions, residence (urban- rural), urban locality size (4 types), degree of development of rural localities (3 categories). Sampling: probabilistic selection of localities (51 total, 27 rural), sample units (streets, 264) and households. Households were selected by random route method. Forty households in rural areas and between 50 and 80 households in urban areas, depending on locality size, were enrolled in order to make the connection between household and locality levels possible. Representativity: the sample is representative for the Romanian household population, with a maximum sampling error of 2 percent. Data was not weighted. In-depth interviews were carried out in "face to face" sessions. 85 86 WORLD BANK WORKING PAPER The Local Officials Survey Sample size: 200. Respondents: mayors, deputy mayors, local councilors, other local officials. Sample type: theoretical. Focus groups and semi-structured interviews: Seventeen focus groups and 33 individual in- depth interviews were carried out in six localities. The localities were selected from three counties in different provinces. Localities differed by urban/rural, level of economic development (poor versus rich communities), and ethnicity. 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Responses among Lone-Mother Families in the UK." Population Studies Center Research Report, No. 01-465. University of Michigan. Ann Arbor, MI. Wedel, J. 1986. "The Private Poland: An Anthropologist Looks at Everyday Life." New York, Facts on File. Zak, P. and S. Knack. 2001. "Trust and Growth." Economic Journal 111: 295­321. Mapped In or Mapped Out? is part of the World Bank Working Paper series. These papers are published to communicate the results of the Bank's ongoing research and to stimulate public discussion. It has been observed in central European countries in general and in Romania in particular that, during transition, strong social ties connecting relatives, immediate friends, and asso- ciates have become stronger, while the weak ties connecting individuals and households through professional and social associations have become weaker. In this context, the poor are reported to be falling out of both types of associations. This volume analyzes patterns of economic and social interac- tions that sustain the poor or, alternatively, isolate them yet further from other households, from the communities in which they live and, by extension, from social networks and economic opportunities. This study also assesses interactions of the poor with local and central governments in terms of the level of trust and satisfaction with public officials, the level of involvement in public actions and public decisionmaking, and the ability of local governments to respond to the needs of their poorer constituency, especially in providing social assis- tance and other Minimum Income Guarantee benefits. World Bank Working Papers are available individually or by subscription, both in print and online. ISBN 0-8213-5888-X TMxHSKIMBy358887zv":;:):):> THE WORLD BANK 1818 H Street, NW Washington, DC 20433 USA Telephone: 202 473-1000 Internet: www.worldbank.org E-mail: feedback@worldbank.org