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Adaptation and the Easterlin Paradox in Russia

Author

Listed:
  • Alexander Larin

    (National Research University Higher School of Economics, Nizhny Novgorod, Russia)

  • Sergey Filyasov

    (National Research University Higher School of Economics, Nizhny Novgorod, Russia)

Abstract

In recent years the dynamic Easterlin Paradox has been confirmed for many European countries as well as for the USA: satisfaction does not depend on real income in the long run. In this paper we test this hypothesis for Russia, in particular we test two main mechanisms of the paradox: adaptation to changes in income and social comparison effect. In order to do that we specify two ARDL-type models and use the RLMS NRU HSE dataset for estimating their parameters. It is shown that there exists only the short run association between agents’ real income and satisfaction with their financial situation even though the dynamics of these two variables was very similar in the past 20 years. Moreover, authors confirm that satisfaction with income is of autoregressive nature itself and it tends to reach and maintain some constant level in the long run. Therefore, these results indicate in favor of the adaptation mechanism and hence the presence of the Easterlin Paradox in Russia even though the social comparison effect is statistically insignificant. The positive co-movement of the aggregate variables might be explained by the massive negative shocks during the 90s which brought down the income and satisfaction. These results are most applicable in the analysis of social inequality, social tension and instability rather than of the effects of economic growth itself.

Suggested Citation

  • Alexander Larin & Sergey Filyasov, 2018. "Adaptation and the Easterlin Paradox in Russia," HSE Economic Journal, National Research University Higher School of Economics, vol. 22(1), pages 59-83.
  • Handle: RePEc:hig:ecohse:2018:1:3
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    Citations

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    Cited by:

    1. Irina I. Semenova, Alyona Yu. Tian, 2024. "Assessment of the Impact of Health Capital on Earnings and Subjective Well-Being of the Employed Population in Russia," Journal of Applied Economic Research, Graduate School of Economics and Management, Ural Federal University, vol. 23(2), pages 279-303.
    2. Zhizhin, Leonid & Knorre, Alex & Kuchakov, Ruslan & Skougarevskiy, Dmitriy, 2023. "Cost of crime in Russia: A compensating variation approach," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 69, pages 91-120.

    More about this item

    Keywords

    Easterlin Paradox; adaptation; well-being; welfare; economics of happiness;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • D6 - Microeconomics - - Welfare Economics

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