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Russian Roulette- Expenditure Inequality and Instability in Russia, 1994-1998

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  • Brando Jovanovic
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    Abstract

    This paper uses the second phase of the Russian Longitudinal Monitoring Survey to investigate the changes in expenditure inequality and instability in Russia between the autumn of 1994 and the autumn of 1998. The expenditure distribution is stable in spite of the economic and political turmoil Russia is going through. However, that does not imply much economic stability. Households' expenditure fluctuated considerably, with over 60 percent of the population's expenditure either more than doubling or falling to less than half their previous levels. Only about 10 percent of all households experienced an expenditure shock of less than 10 percent. The measured level of expenditure mobility is very high. This raises the question whether the observed mobility is in fact the expenditure instability. Distinguishing between the two is crucial for policy makers. While the mobility is often viewed as favorable, the high instability may affect the incentives of Russians to support the economic reforms, acquire human capital, and undertake entrepreneurial activities.

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    File URL: http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp358.pdf
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    Bibliographic Info

    Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 358.

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    Length: pages
    Date of creation: 01 Sep 2000
    Date of revision:
    Handle: RePEc:wdi:papers:2000-358

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    Keywords: expenditure; enequality; mobility; transition; Russia;

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    1. Thierry D. Buchs, 1999. "Financial crisis in the Russian Federation: Are the Russians learning to tango?," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 7(3), pages 687-715, November.
    2. Garcia-Penalosa, Cecilia & Aghion, Philippe & Caroli, Eve, 1999. "Inequality and Economic Growth: The Perspective of the New Growth Theories," Economics Papers from University Paris Dauphine 123456789/10091, Paris Dauphine University.
    3. R. Moffitt & P. Gottschalk, . "Trends in the covariance structure of earnings in the United States: 1969-1987," Institute for Research on Poverty Discussion Papers 1001-93, University of Wisconsin Institute for Research on Poverty.
    4. Ferreira, Francisco H. G., 1997. "Economic transition and the distributions of income and wealth," Policy Research Working Paper Series 1808, The World Bank.
    5. Alberto Alesina & Roberto Perotti, 1993. "Income Distribution, Political Instability, and Investment," NBER Working Papers 4486, National Bureau of Economic Research, Inc.
    6. Atkinson,Anthony Barnes & Micklewright,John, 1992. "Economic Transformation in Eastern Europe and the Distribution of Income," Cambridge Books, Cambridge University Press, number 9780521438827, October.
    7. Newell, Andrew & Reilly, Barry, 1996. "The gender wage gap in Russia: Some empirical evidence," Labour Economics, Elsevier, vol. 3(3), pages 337-356, October.
    8. Perotti, Roberto & Alesina, Alberto, 1996. "Income Distribution, Political Instability, and Investment," Scholarly Articles 4553018, Harvard University Department of Economics.
    9. Branko Milanovic, 1999. "Explaining the increase in inequality during transition," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 7(2), pages 299-341, July.
    10. Ravallion, Martin & Lokshin, Michael, 1999. "Subjective economic welfare," Policy Research Working Paper Series 2106, The World Bank.
    11. Shorrocks, Anthony, 1978. "Income inequality and income mobility," Journal of Economic Theory, Elsevier, vol. 19(2), pages 376-393, December.
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