Policy ReseaRch WoRking PaPeR4567The Dynamics of Ownership of Durable Goods in Bulgaria:From Economic Crisis to EU MembershipOleksiy Ivaschenko Lire ErsadoThe World Bank Europe and Central Asia Region Human Development Sector March 2008WPS4567Public Disclosure AuthorizedPublic Disclosure AuthorizedPublic Disclosure AuthorizedPublic Disclosure AuthorizedProduced by the Research Support TeamAbstractThe Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.Policy ReseaRch WoRking PaPeR 4567The paper uses repeated cross-sections of Bulgaria’s household survey data (1995, 1997, 2001, and 2003) and a comparable list of durable goods to investigate the dynamics and distribution of durable goods over time, including during the economic crisis of 1996-1997 and the subsequent period of relatively robust economic growth leading up to European Union membership. It examines the dynamics of the ownership of durable goods by wealth classes, geographic locations, and various ethnic groups, including the Roma. In the aggregate, there was This paper—a product of the Human Development Sector, Europe and Central Asia Region—is part of a larger effort in the department to enhance growth and reduce poverty. Policy Research Working Papers are also posted on the Web at http://econ.worldbank.org. The author may be contacted at lersado@worldbank.org. convergence between the poorest and the richest classes in the ownership of durable goods between 1995 and 2003, with the poorest class making a significant gain between 2001 and 2003 after having lost some ground between 1995 and 2001. There was also convergence in the ownership of durable goods between urban and rural residents. However, there appear to be some diverging tendencies between Bulgarians and the minority ethnic groups, particularly in the ownership of relatively more expensive goods such as personal computers and cars. The Dynamics of Ownership of Durable Goods in Bulgaria: From Economic Crisis to EU Membership Oleksiy Ivaschenko and Lire Ersado1 1 Oleksiy Ivaschenko, Economist, ECSHD, oivaschenko@worldbank.org; and Lire Ersado, Economist, ECSHD, lersado@worldbank.org. The authors are very grateful for the comments received on the previous version of this paper from Arup Banerji, Hermann Von Gersdorff, Rebekka Grun, Anna Gueorguieva, Michael Lokshin, and Victor Sulla. The views presented in this paper are those of the authors, and should not be attributed to the World Bank Group. 1. INTRODUCTION Now a full-fledged European Union (EU) member country, as of January 1, 2007, Bulgaria has come a long way from its difficult early years of transition to a market economy, including the decline in real GDP by 28 percent between 1990 and 1995. A severe economic crisis in 1996-1997 resulted in a further decline of 15 percent in real GDP just in a single year, during which inflation reached triple digits (Figure 1). However, since 1998 Bulgaria has made impressive progress toward long-term stability and sustained economic growth. In the run-up to EU membership, the Bulgarian economy and institutions had gone through major positive transformations. The period from 1998 to 2006 has been characterized by fiscal discipline and implementation of major structural reforms. As a result of these sound macroeconomic policies and deep structural reforms, Bulgaria has maintained an average GDP growth rate of close to 5 percent during the period, and inflation has been contained at around 6 percent annually (Figure 1). Increased growth and low inflation have contributed to increased per capita income and consumption, which resulted in improved standard of living at the national level. Despite the strong economic growth track-record over the last decade, Bulgaria still remains one of the poorest among the new member countries of the EU. The living standard in Bulgaria is significantly lower than in most other EU member countries and for those in the lower end of the income ladder and for some ethnic minorities, still remains at subsistence level. The country’s income per capita, at PPS in 2005, was 32 and 56 percent of the average level of EU25 and EU8, respectively. - 1 - Owing to the improved growth record since 1998, there is a general consensus that poverty in Bulgaria is on the decline.2 However, welfare comparisons over an extended per。