The impact of foreign trade shocks on well-being of Russian households: Microsimulation approach

In recent years, there have been significant fluctuations in world prices for essential goods, many of which have a significant share in the consumption basket of households. In this study, we analyze how fluctuations in world wheat prices affect the well-being of Russian households. We provide estimates of average welfare losses and of welfare losses in different parts of welfare distribution. We also identify which socio-demographic groups bear the brunt of such price shocks. For evaluation, a microsimulation approach to model the expenditure part of household budgets is used. The empirical basis is the data of the Russian Longitudinal Monitoring Survey (RLMS) for 2020. When modeling a 50% rise in prices for bread, flour and pasta, the average losses amounted to 2.9% of total household expenditures, the largest losses, 5.5% of total expenditures, fall on households in the first decile. Those living in rural areas or urban-type settlements, as well as households headed by a female pensioner, suffer losses at the level of 3% of total household expenses. Families with children are not among the most vulnerable groups with rising prices for bread, flour and pasta.