guaranteed by market-determined incomes unraveled the flat pre-transition skill-income link.

We explore the household surveys to examine whether (controlling for the standard demographic determinants of household savings) characteristics likely to be associated with households' relative likelihood to benefit materially from the transition to markets (and hence to experience an upward tilting of expected lifetime income profiles) and with income uncertainty are indeed systematically related to savings behavior. The next section describes the data. Section three presents some stylized facts derived from the unconditional distribution of savings rates by household characteristics. Section four presents regression results, and section five concludes.

# **2. Data**

Our results are based on three surveys contained in the _World Bank Household Expenditure and Income Data for Transitional Economies_ database. The household surveys (using stratified random samples) cover 2.466 households in Bulgaria (survey year 1995), 8.105 households in Hungary (survey year 1993) and 16.051 households in Poland (survey year 1993). The original surveys were conducted by different institutions; and were placed into a consistent format by the World Bank<sup>2</sup> to achieve comparability across the three countries, Each survey contains detailed information regarding the household's expenditure (eight categories) and its income sources (12 categories for Poland and Bulgaria, 11 categories for Hungary). Savings are defined as the difference between disposable household income and household expenditure.<sup>3</sup> In addition, the dataset contains information about asset ownership (five categories for Poland and Bulgaria, four categories for Hungary), household size, age and gender composition, location (urban/rural), sector of employment and education.

Based on this information, we construct a set of explanatory variables used in the regression reported below. The log and the squared log of the age of the head of household proxies for life cycle factors. A set of 0-1 dunmmies controls for the effect of various household characteristics on savings, comprising dummies for households located in rural areas, large households with more than four residents, households owning land, households owning productive assets, female heads of households, a set of dunmmies set equal to one if the highest level of education attained by the head of the household was primary, secondary or vocational (the reference group is tertiary education) and a set of dummies for the household position in the income distribution, measured in quintiles.

2 See Household Expenditure and Income Data for Transitional Economies (HEIDE), Appendix 2 of RAD project '?overty and Targeting of Social Assistance in Eastern Europe and the Former Soviet Union". Household savings rates are notoriously difficult to measure accurately even in mature market economies because of underreporting. While considerable effort has been made to purge the dataset from clear outliers, we additionally drop all observations with an implied dis-savings rate above fifty percent. The frequency distribution did not suggest outliers on the right-hand-side tail of the distribution, while all three samples contain several extremely large (of the order of minus several thousand percent) negative savings rates, which are eliminated by the threshold condition.