either on public sector, private sector or unemployed/out of labor force (base category), hence the effect is with respect to being unemployed/inactive. This is a somehow puzzling result, since there is weak evidence that being employed by the public sector at the time of the survey has the opposite effect (less chances of perceiving downwards movements). A possible explanation is that this variable is picking up the effect of belonging to the 55-65 years old (in 2006) group. (See Figure A1.2) It is in this group where the shares of time in public sector reaches its highest, as opposed to the younger workers (private) and older workers (unemployed/inactive). For the number of jobs held between 1989 and 2006, which can work as a metric of the turmoil introduced by the reforms in economies where the labor market used to guarantee a position for all workers for life, the effects are also non statistically significant. This result hints that the current personal employment situation is more important than the memory for the perceptions of mobility.

# **The role of income and macroeconomic indicators**

**Current income explains only a minor fraction of the observed variation in perceptions.** Estimating OLS regressions on the raw changes in step between 1989 and 2006 against two welfare measures (consumption and asset index), we obtain that welfare explains only a minor fraction of the variation in perceptions, though the parameters are statistically significant. Consumption can only explain 5% of the variations in perceptions, while the asset index explains only 8%, as measured by using the R-squared of the regressions (Table A2.1). Moreover, when consumption deciles are included in the regression containing all the other variables, they do not show any significant effect over perceived economic mobility.

**Countries with weak growth have on average more negative perceptions, particularly for those countries faring better pre-transition.** A 10-percent increase in GDP per capita between 1990 and 2006 translates into 3 percentage points higher probabilities of perceiving a movement up. However, the starting point matters for perceptions of mobility: for countries with similar growth, a higher GDP per capita in 1990 (by US$1,000) translates into a 3 percentage point lower probability of reporting improvements.

**A stronger economic contraction during the transition period is associated with more positive perceptions.** After controlling for the effect of initial GDP per capita level and the change between 1990 and 2006, a more severe contraction of the GDP per capita during the nineties is associated with more probabilities of self-reported upward economic mobility. This result suggests that those in countries that experienced tough economic times in the nineties place more value in the country’s or own relatively improved economic situation by 2006. The lowest point during the transition period is likely to be a reference point for countries that had severe economic contractions.

**Bigger public sectors in 1989 are associated with more negative perceptions.** With the exception of Turkey, in all the countries of the region the State controlled considerable productive resources in the economy. This translated in massive public employment which ranged from 57% for Czech Republic to 91% in Belarus (own estimation based on EBRD 2006). The regression analysis shows that an increment of 10 percentage points in the share of public employment in 1989 translates in 9 percentage points less probabilities of perceiving upward mobility. This result hints that populations in countries that use to have more certainty about future employment may have been hit worse by the changes introduced with the liberalization of the economy.

**Accordingly, countries that reduced more intensely their share of public employment have more negative perceptions.** Between 1989 and 2006 all countries in the region reduced the participation of the State in the economy. This ranged between 13 percentage points in Belarus to 50 percentage points in Bulgaria (own estimation based on EBRD 2006). A reduction of 10 percentage points in this share lowers the

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