Decomposition of Income Inequality in Contemporary Russia

Over the last 25 years, Russia has passed from the group of countries distinguished by low levels of income inequality to the group distinguished by high ones. The macroeconomic analysis shows that this process is due to the differences in salaries, the weak equalizing effect of social transfers and new sources of income such as the income from property and of business activity. We have a poor understanding of the factors determining this inequality at the household level so far. Decomposition of equivalised household expenditure inequality into inter- and intra-groups using cross-sectional data (RLMS-HSE, 1994-2014) shows that during the whole research period one of the most significant factors of intergroup inequality is region of residence. During periods of high economic growth the significance of education and intensity of employment increased in intergroup inequality; however, during the period of economic stagnation the intergroup differentiation of educational potential began to decrease. Despite the important population policy aimed to increase the birth rate, children in families have become the most significant factor of intergroup inequality for the last years. A regression analysis of the determinants of inequality, which allows us to estimate the contribution of each factor to the model dispersion of per capita expenditure allows us to draw the conclusion that meritocratic factors explain a majority of observed inequality. The contribution of the child-burden factor to total inequality did not change during the past ten years, and at the same time, the inequality-decreasing effect of the presence of pensioners in households has continuously increased.