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Social Spending and Household Welfare: Evidence from Azerbaijan

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  • Ramiz Rahmanov

    (Central Bank of the Republic of Azerbaijan)

Abstract

We measure the response of household consumption of different income groups to social spending during the 2002-2012 period using the aggregated Household Budget Survey Data. We find that households respond more strongly to changes in pensions than to changes in allowances and in-kind transfers. The very weak response of households to changes in allowances and in-kind transfers, both of which are transitory income, is consistent with the permanent income hypothesis. The estimates of pension elasticities suggest that the response of the low income group to changes in pensions is the strongest, whereas the response of the middle income group is the weakest. We further find that, in aggregate, households of all income groups do not exhibit habit persistence.

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File URL: http://repec.graduateinstitute.ch/pdfs/Working_papers/HEIDWP02-2014.pdf
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Bibliographic Info

Paper provided by Economics Section, The Graduate Institute of International Studies in its series IHEID Working Papers with number 02-2014.

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Length: 13 pages
Date of creation: 11 Feb 2014
Date of revision:
Handle: RePEc:gii:giihei:heidwp02-2014

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Keywords: social spending; consumption; permanent income hypothesis; welfare; Azerbaijan;

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  1. Hall, Robert E & Mishkin, Frederic S, 1982. "The Sensitivity of Consumption to Transitory Income: Estimates from Panel Data on Households," Econometrica, Econometric Society, vol. 50(2), pages 461-81, March.
  2. Harun Onder, 2013. "Azerbaijan : Inclusive Growth in a Resource-Rich Economy," World Bank Publications, The World Bank, number 12228, October.
  3. Hymans, Saul H. & Shapiro, Harold T., 1976. "The allocation of household income to food consumption," Journal of Econometrics, Elsevier, vol. 4(2), pages 167-188, May.
  4. Mateusz Walewski & Alexander Chubrik, 2010. "Oil-led economic growth and the distribution of Real Household Incomes and Consumption in Azerbaijan," CASE Network Studies and Analyses 417, CASE-Center for Social and Economic Research.
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