Developing a Safety Net for Ukraine

Publication Date: April 2007

Publisher: Pardee Rand Graduate School

Author(s): Oleksandr Rohozynsky

Research Area: Economics

Type: Report

Coverage: Ukraine

Abstract:

This dissertation explores issues of development of social safety nets (SSN) in countries in transition, Ukraine in particular, and looks at whether reducing social security expenditures to stimulate economic growth policy is an effective way to combat poverty in such countries. The dissertation develops a sequence of increasingly sophisticated forecasting models to explore the fiscal and economic implications of recent increases in social welfare spending in Ukraine: a simple macroeconomic model; a macroeconomic model with GDP feedback; and a microsimulation model. The analysis based on the models suggests that the simple macroeconomic model may significantly underestimate costs of SSN. Policy analysis based on the microsimulation model suggests that a policy of increasing social benefits in the current social safety net system would be the least optimal policy within the scope of evaluated policies to reduce number of people in poverty while sustaining economic growth. The dissertation concludes that available SSN financial resources would be more effective in reducing poverty if current SSN programs were replaced by a minimal subsistence level income guarantee program.