Abstract:Using a panel from the Russian Longitudinal Monitoring Survey (1994)(1995)(1996)(1997)(1998)(1999)(2000)(2001)(2002)(2003)(2004), this paper investigates to what extent Russian households have been able to maintain their living standards while suffering income shocks. Consumption smoothing is modelled by means of an equilibrium correction mechanism, which disentangles short-run dynamics and long-run equilibrium adjustments. GMM estimation is used to control for individual household effects in the presence of d… Show more
“…We found only a few examples of significant smoothing effects when consumption expenditures declined less, over the times of the economic shocks, than did household income. This is consistent with previous findings on Russia rejecting the full insurance hypothesis that current consumption is entirely detached from contemporary income shocks (Notten & de Crombrugghe, ). On the contrary, this observation implies that households have limited capacities to shield the overall level of their consumption from falling.…”
Section: Discussionsupporting
confidence: 93%
“…Research on Russia demonstrates that the expenditure poverty rate rose in the aftermath of the 1998 financial crisis, while the overall level of inequality fell (Lokshin & Ravallion, ). In the RLMS‐HSE data, the high‐income group makes larger adjustments in food spending in response to income shocks (Notten & de Crombrugghe, ). Here we formulate two alternative hypotheses: H3a: Economic shocks decrease differences in the household per capita income and consumption expenditures among income groups . H3b: Economic shocks increase differences in the household per capita income and consumption expenditures among income groups .…”
Section: Consumption Expenditures Under Economic Shocks: Research Hypmentioning
confidence: 99%
“…Economic shocks have become more frequent in recent decades, and abundant research has analysed their effects on living standards in different countries (among the most recent studies, see Alonso, Rodríguez, & Rojo, ; Bono, Cracolici, & Cuffaro, ; Monseni‐Cheraghlou, ; Whelan, Russell, & Maıtre, ). Numerous studies have investigated the case of postcommunist Russia (Ekström, Ekström, Potapova, & Shanahan, ; Lokshin & Ravallion, ; Lokshin & Yemtsov, ; Notten & de Crombrugghe, ; Ovcharova & Popova, ; Stillman, ). These studies demonstrate that exogenous economic shocks have large and significant effects on both food and total household expenditures.…”
The authors examine the changes in the level and composition of consumption expenditures and their associations with household per capita incomes across the four different economic shocks that Russia has experienced since 1994. Data were collected from a nationally representative annual panel survey of households between 1994 and 2014, supplemented by the Federal State Statistics Service source. Four hypotheses on the relationship between per capita income and consumption, the composition of cutbacks, a levelling of expenditures among income groups, and the stability of the pattern of consumer response to economic shocks are proposed. The data demonstrate that consumption expenditures on food, non‐food, and services decreased together with per capita income during the four economic shocks. Only a few examples of significant smoothing effects were found. All income groups recomposed their expenditures to maintain consumption of necessities. The high‐income group reduced a higher proportion of expenditures on food and services, implying that economic shocks produce a temporary levelling effect on the living standards of different income groups. A relatively stable pattern of consumer responses to economic shocks was revealed, despite these shocks’ divergence; this pattern implies a temporary economization and simplification of expenditures with a fast return to pre‐crisis spending once the crisis is over.
“…We found only a few examples of significant smoothing effects when consumption expenditures declined less, over the times of the economic shocks, than did household income. This is consistent with previous findings on Russia rejecting the full insurance hypothesis that current consumption is entirely detached from contemporary income shocks (Notten & de Crombrugghe, ). On the contrary, this observation implies that households have limited capacities to shield the overall level of their consumption from falling.…”
Section: Discussionsupporting
confidence: 93%
“…Research on Russia demonstrates that the expenditure poverty rate rose in the aftermath of the 1998 financial crisis, while the overall level of inequality fell (Lokshin & Ravallion, ). In the RLMS‐HSE data, the high‐income group makes larger adjustments in food spending in response to income shocks (Notten & de Crombrugghe, ). Here we formulate two alternative hypotheses: H3a: Economic shocks decrease differences in the household per capita income and consumption expenditures among income groups . H3b: Economic shocks increase differences in the household per capita income and consumption expenditures among income groups .…”
Section: Consumption Expenditures Under Economic Shocks: Research Hypmentioning
confidence: 99%
“…Economic shocks have become more frequent in recent decades, and abundant research has analysed their effects on living standards in different countries (among the most recent studies, see Alonso, Rodríguez, & Rojo, ; Bono, Cracolici, & Cuffaro, ; Monseni‐Cheraghlou, ; Whelan, Russell, & Maıtre, ). Numerous studies have investigated the case of postcommunist Russia (Ekström, Ekström, Potapova, & Shanahan, ; Lokshin & Ravallion, ; Lokshin & Yemtsov, ; Notten & de Crombrugghe, ; Ovcharova & Popova, ; Stillman, ). These studies demonstrate that exogenous economic shocks have large and significant effects on both food and total household expenditures.…”
The authors examine the changes in the level and composition of consumption expenditures and their associations with household per capita incomes across the four different economic shocks that Russia has experienced since 1994. Data were collected from a nationally representative annual panel survey of households between 1994 and 2014, supplemented by the Federal State Statistics Service source. Four hypotheses on the relationship between per capita income and consumption, the composition of cutbacks, a levelling of expenditures among income groups, and the stability of the pattern of consumer response to economic shocks are proposed. The data demonstrate that consumption expenditures on food, non‐food, and services decreased together with per capita income during the four economic shocks. Only a few examples of significant smoothing effects were found. All income groups recomposed their expenditures to maintain consumption of necessities. The high‐income group reduced a higher proportion of expenditures on food and services, implying that economic shocks produce a temporary levelling effect on the living standards of different income groups. A relatively stable pattern of consumer responses to economic shocks was revealed, despite these shocks’ divergence; this pattern implies a temporary economization and simplification of expenditures with a fast return to pre‐crisis spending once the crisis is over.
“…It includes responses such as seeking assistance from government administrated social programs, for instance, social assistance, housing, children and unemployment benefits, as well as borrowing from individuals through formal and informal institutions. Such responses can be understood as forms of a ''risk sharing'' approach utilized by the members of society (Notten and de Crombrugghe 2012).…”
Section: Coping Strategiesmentioning
confidence: 99%
“…Within the field of study of household coping strategies, there is a well-established tradition of categorizing the existing responses into three broad groups, (1) active strategies, for instance, getting an additional job, (2) safety net strategies, for instance, getting help from the welfare state, and (3) passive (depleting) strategies, such as reducing consumption (Clarke 2002;Gerasimova 2005;Gerry and Li 2010;Lokshin and Yemtsov 2004;Notten and de Crombrugghe 2012). Studies regarding the determinants of coping strategies were conducted in Russia (Kabalina and Clarke 1999;Skoufias 2003), and in other transitional countries (Bidani et al 2012), and Latin America (Fiszbein et al 2003).…”
This study examines the ways in which the fabric of community-level social capital has affected the ex-post strategies of households in dealing with the 2007-2008 crisis in the transitional economies of Eastern Europe and the former Soviet Union. The data has been derived from nationally-representative surveys conducted in 28 transitional countries. The findings reveal that choices made with respect to survival strategies during the crisis were strongly dependent on community-level social capital. Higher levels of social capital within a community are associated with an increase in the utilization of active and safety net coping strategies. It was also found that most households were forced to employ depleting coping strategies, and that few households applied to safety net strategies.
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