Household welfare and income shocks : the case of Russia

• Main Author: Richter, Kaspar
• Published: London School of Economics and Political Science (University of London) 2004
• Subjects: 339.220947
• Online Access: http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.418297

The thesis investigates the impact of changes in household income on household welfare in Russia during 1994 to 1998. Part I introduces the main estimation techniques (Instrumental Variables, Difference-In-Differences and Matching), the data sources and the context of the Russian arrears crisis. Part II contains the empirical analysis. Chapter 5 simulates the effect of government cash transfers on poverty with Instrumental Variables estimation, taking into account consumption smoothing of households. Changes in cash transfer policy led unambiguously to a rise in poverty between 1994 and 1998. Chapter 6 explores the welfare effects of non-payments of pensions in 1996 using a Difference-In-Differences model. The loss of pension income doubled poverty rates and worsened nutrition among affected pensioners. Elderly men suffered from a decline in health and were more likely to die in the two years following the crisis. Households responded in ways that mitigated the impact of the crisis, replacing one-fifth of lost pension income through increased labour supply and asset sales. Chapter 7 analyses the impact of wage arrears on the elderly who were either working themselves or living together with workers. Matching techniques establish that wage arrears had a detrimental impact on old age welfare, including current and future health, over a wide range of control variables and sample restrictions. In line with the findings on pension arrears, the effect was larger on men than on women. Arrears households compensated about 10 to 14 percent of the wage loss from other income sources. Chapter 8 studies the link between wage arrears and child health. Wage arrears resulted in a decline of economic well-being, nutrition and growth status of affected children. Arrears households replaced up to one fifth of the wage reduction with other receipts. The final chapter summarizes the main findings.