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This paper uses data from the Russian Longitudinal Survey that span the two recent economic recessions of 1998 and 2008 to study the effect of declining incomes on household composition. We hypothesize that individuals face a trade-off between taking advantage of economies of scale and specialization when living with others, and individual privacy. Consumption smoothing is achieved by forgoing privacy during the crisis and results in increases in household size. Our empirical results suggest that members of households that experienced negative income shocks are more likely to move in with others compared to individuals residing in households whose income remained the same or increased.JEL classifications: J12, D12.

Hardly any literature exists on the relationship between equivalence scales and poverty dynamics for transitional countries. We offer a new study on the impacts of equivalence scale adjustments on poverty dynamics in the Russian Federation, using equivalence scales constructed from subjective wealth and more than 20 waves of household panel survey data from the Russia Longitudinal Monitoring Survey. The analysis suggests that the equivalence scale elasticity is sensitive to household demographic composition. The adjustments for the equivalence of scales result in lower estimates of poverty lines. We decompose poverty into chronic and transient components and find that chronic poverty is positively related to the adult scale parameter. However, chronic poverty is less sensitive to the child scale factor compared with the adult scale factor. Interestingly, the direction of income mobility might change depending on the specific scale parameters that are employed. The results are robust to different measures of chronic poverty, income expectations, reference groups, functional forms, and various other specifications.

This paper uses data from the Russian Longitudinal Survey that span the two recent economic recessions of 1998 and 2008 to study the effect of declining incomes on household composition. We hypothesize that individuals face a tradeoff between taking advantages of economies of scale and specialization when living with others and individual privacy. Consumption smoothing is achieved by forgoing privacy during a crisis and results in an increase in household size. Our empirical results suggest that members of the households that experienced negative income shocks are more likely to move in with others than households whose income remained the same or increased.

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