Poverty risk and consumption smoothing abilities in Russia
This paper investigates to what extent Russian households have been able to protect their consumption against income shocks during the transition and in what manner the ability to smooth consumption is related to poverty risk. We use data from the Russian Longitudinal Monitoring Survey (1994-2004). Empirical analyses of such panels have often been based on differenced data in order to eliminate individual household effects. An innovative aspect of this study is that we model households smoothing behaviour by means of an Error Correction Mechanism (ECM); this model explicitly distinguishes between short and long run dynamics of consumption and income and thus better exploits the information in the level data. We find that households are only partially able to protect their consumption from income shocks and that income shocks have a smaller impact on food consumption than on non-food consumption. The results also suggest that the population is not homogeneous in terms of consumption smoothing abilities; partial estimations show that consumption smoothing ability improve as the living standard increases. However, below average consumption smoothing abilities are not always associated with higher poverty risk; rural households, who have a high poverty risk, manage to smooth food expenditures quite well, most likely because they have more opportunities to produce their own food. These exploratory results suggest that development and social protection policies should not only play a role in terms of poverty reduction but also influence households' abilities to manage risks.
|Date of creation:||Sep 2006|
|Date of revision:||27 Jul 2007|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kimball, Miles S, 1990.
"Precautionary Saving in the Small and in the Large,"
Econometric Society, vol. 58(1), pages 53-73, January.
- Miles S. Kimball, 1989. "Precautionary Saving in the Small and in the Large," NBER Working Papers 2848, National Bureau of Economic Research, Inc.
- Morduch, Jonathan, 1994. "Poverty and Vulnerability," American Economic Review, American Economic Association, vol. 84(2), pages 221-225, May.
- Morduch, J., 1995. "Poverty and Vulnerability," Papers 477, Harvard - Institute for International Development.
- Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-766, May.
- Townsend, Robert M, 1994. "Risk and Insurance in Village India," Econometrica, Econometric Society, vol. 62(3), pages 539-591, May.
- Robert M. Townsend, "undated". "Risk and Insurance in Village India," University of Chicago - Population Research Center 91-3a, Chicago - Population Research Center.
- Townsend, R.M., 1991. "Risk and Insurance in Village India," University of Chicago - Economics Research Center 91-3, Chicago - Economics Research Center.
- Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 38(2), pages 112-134.
- Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, vol. 46(6), pages 1251-1271, November.
- J. A. Hausman, 1976. "Specification Tests in Econometrics," Working papers 185, Massachusetts Institute of Technology (MIT), Department of Economics.
- Altonji, Joseph G & Hayashi, Fumio & Kotlikoff, Laurence J, 1992. "Is the Extended Family Altruistically Linked? Direct Tests Using Micro Data," American Economic Review, American Economic Association, vol. 82(5), pages 1177-1198, December.
- Joseph G. Altonji & Fumio Hayashi & Laurence J. Kotlikoff, 1989. "Is the Extended Family Altruistically Linked? Direct Tests Using Micro Data," NBER Working Papers 3046, National Bureau of Economic Research, Inc.
- Fafchamps, Marcel & Lund, Susan, 2003. "Risk-sharing networks in rural Philippines," Journal of Development Economics, Elsevier, vol. 71(2), pages 261-287, August.
- Marcel Fafchamps & Susan Lund, "undated". "Risk Sharing Networks in Rural Philippines," Working Papers 97014, Stanford University, Department of Economics.
- Marcel Fafchamps & Susan Lund, 2000. "Risk-Sharing Networks in Rural Philippines," Economics Series Working Papers 10, University of Oxford, Department of Economics.
- Holzmann,Robert & Jorgensen,Steen Lau, 2000. "Social risk management : a new conceptual framework for social protection and beyond," Policy Research Working Paper Series 21314, The World Bank.
- Mace, Barbara J, 1991. "Full Insurance in the Presence of Aggregate Uncertainty," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 928-956, October.
- Notten, Geranda & Neubourg, Chris de, 2007. "Managing risks: what Russian households do to smooth consumption?," MPRA Paper 4670, University Library of Munich, Germany.
- Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762, Diciembre.
- Jeffrey M. Wooldridge, 2001. "Applications of Generalized Method of Moments Estimation," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 87-100, Fall.
- Martin Ravallion & Shubham Chaudhuri, 1997. "Risk and Insurance in Village India: Comment," Econometrica, Econometric Society, vol. 65(1), pages 171-184, January.
- Jonathan Morduch, 1995. "Income Smoothing and Consumption Smoothing," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 103-114, Summer.
- Morduch, J., 1995. "Income Smoothing and Consumption Smoothing," Papers 512, Harvard - Institute for International Development.
- Jonathan Morduch, 1995. "Income Smoothing and Consumption Smoothing," Harvard Institute of Economic Research Working Papers 1727, Harvard - Institute of Economic Research.
- Cochrane, John H, 1991. "A Simple Test of Consumption Insurance," Journal of Political Economy, University of Chicago Press, vol. 99(5), pages 957-976, October.
- Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
- Tom Doan, "undated". "RATS program to replicate Arellano-Bond 1991 dynamic panel," Statistical Software Components RTZ00169, Boston College Department of Economics.
- Windmeijer, Frank, 2005. "A finite sample correction for the variance of linear efficient two-step GMM estimators," Journal of Econometrics, Elsevier, vol. 126(1), pages 25-51, May. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:5314. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If references are entirely missing, you can add them using this form.