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Social Spending and Household Welfare: Evidence from Azerbaijan


  • Ramiz Rahmanov

    (Central Bank of the Republic of Azerbaijan)


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.

Suggested Citation

  • Ramiz Rahmanov, 2014. "Social Spending and Household Welfare: Evidence from Azerbaijan," IHEID Working Papers 02-2014, Economics Section, The Graduate Institute of International Studies.
  • Handle: RePEc:gii:giihei:heidwp02-2014

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    References listed on IDEAS

    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 461-481, March.
    2. Harun Onder, 2013. "Azerbaijan : Inclusive Growth in a Resource-Rich Economy," World Bank Publications, The World Bank, number 12228.
    3. 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.
    4. 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.
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    More about this item


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

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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