Notten, Geranda and de Crombrugghe, Denis (2006): Poverty risk and consumption smoothing abilities in Russia.
Download (245kB) | Preview
This paper investigates to what extent Russian households have been able to protect their consumption against income shocks during the transition and in what manner the ability to smooth consumption is related to poverty risk. We use data from the Russian Longitudinal Monitoring Survey (1994-2004). Empirical analyses of such panels have often been based on differenced data in order to eliminate individual household effects. An innovative aspect of this study is that we model households smoothing behaviour by means of an Error Correction Mechanism (ECM); this model explicitly distinguishes between short and long run dynamics of consumption and income and thus better exploits the information in the level data. We find that households are only partially able to protect their consumption from income shocks and that income shocks have a smaller impact on food consumption than on non-food consumption. The results also suggest that the population is not homogeneous in terms of consumption smoothing abilities; partial estimations show that consumption smoothing ability improve as the living standard increases. However, below average consumption smoothing abilities are not always associated with higher poverty risk; rural households, who have a high poverty risk, manage to smooth food expenditures quite well, most likely because they have more opportunities to produce their own food. These exploratory results suggest that development and social protection policies should not only play a role in terms of poverty reduction but also influence households' abilities to manage risks.
|Item Type:||MPRA Paper|
|Institution:||Maastricht Graduate School of Governance, Maastricht University|
|Original Title:||Poverty risk and consumption smoothing abilities in Russia|
|Keywords:||poverty; consumption smoothing; error correction model; Russia|
|Subjects:||D - Microeconomics > D3 - Distribution > D31 - Personal Income, Wealth, and Their Distributions
D - Microeconomics > D1 - Household Behavior and Family Economics > D12 - Consumer Economics: Empirical Analysis
I - Health, Education, and Welfare > I3 - Welfare, Well-Being, and Poverty > I32 - Measurement and Analysis of Poverty
|Depositing User:||Geranda Notten|
|Date Deposited:||15. Oct 2007|
|Last Modified:||17. Apr 2015 05:04|
Altonji, J. G., Hayashi, F., & Kotlikoff, L. J. (1992). Is the Extended Family Altruistically Linked? Direct Tests Using Micro Data. American Economic Review, 82(5), 1177-1198. Arellano, M., & Bond, S. (1991). Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations. Review of Economic Studies, 58(2), 277-297. Atkinson, A. B., Rainwater, L., Smeeding, T.M. (1995). Income distribution in OECD countries: the evidence from the Luxembourg Income Study (LIS). Paris: Organisation for Economic Co-operation and Development. Baltagi, B. H. (2001). A companion to theoretical econometrics Malden, Mass., [etc.] : Blackwell. Bardhan, P., & Udry, C. (1999). Development microeconomics: Oxford and New York: Oxford University Press. Brown, A. (1999). The Russian crisis: Beginning of the end or end of the beginning? Post-Soviet Affairs, 15(1), 56. Buchs, T. D. (1999). Financial crisis in the Russian Federation. Economics of Transition, 7(3), 687. Cochrane, J. H. (1991). A simple test of consumption insurance. Journal of Political Economy, 99(5), 957. Commander, S., Tolstopiatenko, A., & Yemtsov, R. (1999). Channels of redistribution. Economics of Transition, 7(2), 411. Deaton, A. (1992). Understanding consumption: Clarendon Lectures in Economics. Oxford; New York; Toronto and Melbourne: Oxford University Press, Clarendon Press. Deaton, A. (1997). The analysis of household surveys: A microeconometric approach to development policy: Baltimore and London: Johns Hopkins University Press for the World Bank. Deaton, A., & Muellbauer, J. (1980). Economics and Consumer Behavior. Cambridge: Cambridge University Press. Fafchamps, M., & Lund, S. (2003). Risk-Sharing Networks in Rural Philippines. Journal of Development Economics, 71(2), 261-287. Foster, J., Greer, J., & Thorbecke, E. (1984). A Class of Decomposable Poverty Measures. Econometrica, 52(3), 761-766. Greene, W. H. ( 2003). Econometric Analysis (5 ed.). New Jersey: Prentice Hall. Hausman, J. A. (1978). Specification Tests in Econometrics. Econometrica, 46(6), 1251-1271. Holzman, R., & Jorgensen, S. ( February 2000). Social Risk Management: A New Conceptual Framework for Social Protection and Beyond: The World Bank. Kimball, M. S. (1990). Precautionary Saving in the Small and in the Large. Econometrica, 58(1), 53-73. Mace, B. J. (1991). Full Insurance in the Presence of Aggregate Uncertainty. The Journal of Political Economy, 99(5), 928-956. Maslow, A. H. (1987). Motivation and Personality (3 ed.). New York Longman. Milanovic, B. (1998). The Role of Social Assistance in Addressing Poverty. In J. Braitwaite, C. Grootaert & B. Milanovic (Eds.), Determinants of Poverty and Targeting Social Assistance in Eastern Europe and the Former Soviet Union: Poverty Reduction Economic Management and Human Development Networks, The World Bank. Morduch, J. (1994). Poverty and Vulnerability. The American Economic Review, 84(2), 221-225. Morduch, J. (1995). Income Smoothing and Consumption Smoothing. The Journal of Economic Perspectives, 9(3), 103-114. Neubourg de, C., & Notten, G. (May 2002). Assessing Vulnerability to Poverty: the Dynamics of Risk Exposure and Risk Dealing Capacities. Paper presented at the 10e Studiedagen, SISWO. Neubourg de, C., & Weigand, C. ( 2000). Social Policy as Social Risk Management. Innovation: The European Journal of Social Sciences, 13(4), 401-412. Notten, G. (2007). Managing risks: what do Russian households do and what can they do to smooth consumption? MGSoG Working Paper, Maastricht Graduate School of Governance, Maastricht University. Ravallion, M. (1994). Poverty Comparisons (Vol. 56): Harwood Academic Press. Ravallion, M., & Chaudhuri, S. (1997). Risk and Insurance in Village India: Comment. Econometrica, 65(1), 171-184. Sapir, J. (1999). Russia's Crash of August 1998: Diagnosis and Prescription. Post-Soviet Affairs, 15(1), 1-36. Skoufias, E. (2003). Consumption smoothing in Russia: Evidence from the RLMS. Economics of Transition, 11(1), 67-91. Slay, B. (1999). An Interpretation of the Russian Financial Crisis. Post-Soviet Geography and Economics, 40(3), 206-214. Social Security Association. (2002). Social Protection Programs throughout the World. Retrieved October 2005. Townsend, R. M. (1994). Risk and Insurance in Village India. Econometrica, 62(3), 539-591. Windmeijer, F. (2005). A finite sample correction for the variance of linear efficient two-step GMM estimators. Journal of Econometrics, 126, 25-51. Wooldridge, J. M. (2001). Applications of Generalized Method of Moments Estimation. The Journal of Economic Perspectives, 15(4), 87-100. World Bank. (1995). Poverty in Russia: An Assessment: The World Bank. World Bank. (1998). Poverty Policy in Russia: Targeting and the Longer-term Poor, A Policy Note: ECSPE and ECSHD ECA, The World Bank. World Bank. (May 1999). Consultations with the Poor: The World Bank. Zurabov, M. (July 2002). Pension Reform in the Russian Federation; Current Questions on Pension Reform. Paper presented at the Seminar for Social Security Actuaries and Statisticians: Actuarial Aspects of Pension Reform.