Are private transfers poverty and inequality reducing? Household level evidence from Bulgaria

With the use of household level data from Bulgaria, treatment effect models and decomposition techniques, we explore the determinants of private transfers and their welfare implications. Our results are consistent with the altruistic hypothesis in that transfers allocate towards households with observed and unobserved characteristics correlated with relatively low levels of welfare. The receipt of transfers improves the living standards of the recipients and decreases their probability of being poor. At the same time, private transfers have only a small positive impact on the expenditure gap between households receiving transfers and those not receiving transfers. Inequality in living standards is primarily driven by unobserved characteristics and to a smaller extent by factors such as education and experience. Journal of Comparative Economics 36 (4) (2008) 584-598. © 2008 Association for Comparative Economic Studies.