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Entry to and Exit from Poverty in Russia: Evidence from Longitudinal Data

Entry to and Exit from Poverty in Russia: Evidence from Longitudinal Data Irina Denisova New Economic School, Moscow Motivation Long-term sustainability requires social stability and could be undermined by high poverty levels.

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Entry to and Exit from Poverty in Russia: Evidence from Longitudinal Data

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  1. Entry to and Exit from Poverty in Russia: Evidence from Longitudinal Data Irina Denisova New Economic School, Moscow 4th Russia-India-China Conference, New Dehli, November 20-21

  2. Motivation • Long-term sustainability requires social stability and could be undermined by high poverty levels. • Poverty in Russia declined during the last five years from 29% of population in 2000 to 15% in 2006. Still more than twenty five million people have incomes that are lower than subsistence level • The economic crisis is likely to increase poverty. The most vulnerable groups? • Significant body of literature on poverty in Russia • literature analyzes primarily stocks of poverty • only some indirect insights about flows in and out of poverty • an understanding of how entry to poverty and exit from poverty are shaped is lacking • For the field: initial income distribution in transition is very condensed. The role of educational and health endowments could be convincingly highlighted (less correlation with household wealth endowment) 4th Russia-India-China Conference, New Dehli, November 20-21

  3. Literature • Poverty incidence is sizeable but poverty gap is small for most families • Limited opportunities to smooth consumption • Most poverty is transitory. Observable determinants of transitory and chronic poverty are the same • The vulnerable: • Large families • Families with children (particularly single parent) • Rural households • Families with unemployed family heads or wage arrears • The Buffers • Pensions • Education 4th Russia-India-China Conference, New Dehli, November 20-21

  4. Research questions • What are the determinants of entry to and exit from poverty (duration of poverty and non-poverty spells)? • Are the two processes symmetric or there are important asymmetries? • What are the time-related properties of the flows? Are there changes brought to life by the economic growth that followed the economic decline? 4th Russia-India-China Conference, New Dehli, November 20-21

  5. Data • Russian Longitudinal Monitoring Survey • Waves 5 – 13 (1994 to 2004) • Nationally representative, about 5,000 households in each round • Very complete income and expenditure information • Follows same household structure • Panel attrition is a serious issue 4th Russia-India-China Conference, New Dehli, November 20-21

  6. 4th Russia-India-China Conference, New Dehli, November 20-21

  7. Comparing Panel Sample with Period Samples (Mills, 2007) 4th Russia-India-China Conference, New Dehli, November 20-21

  8. Study measures • Absolute poverty concept • Total household income is main measure of household economic well-being • Region specific poverty lines • Local diets • Regional prices • Estimated household equivalence scales 4th Russia-India-China Conference, New Dehli, November 20-21

  9. Poverty rates (RLMS definition) 4th Russia-India-China Conference, New Dehli, November 20-21

  10. Methodology • Survival analysis • Eliminates estimation bias due to non-normality of time to event and right-censoring • Allows using an unbalanced panel • Proportional hazard model • Cox model specification (non-parametrical baseline) • Cluster on id (to take into account multiple failures) • Try strata on settlement type and period (allows baseline hazard to vary across the groups) 4th Russia-India-China Conference, New Dehli, November 20-21

  11. Methodology • Explanatory variables (X) include • demographic characteristics of a household; • labor market attachment of adult family members; • eligibility for public transfers; • characteristics of human capital of a household; • settlement type and economic region; • time period • Changes in variables in X are considered 4th Russia-India-China Conference, New Dehli, November 20-21

  12. Panel statistics 4th Russia-India-China Conference, New Dehli, November 20-21

  13. Gaps in data record: an example 1, 3 and 5 – underestimate poverty spells 4, 6 and 8 – underestimate non-poverty spells 2 and 7 - overestimate poverty and non-poverty spells 4th Russia-India-China Conference, New Dehli, November 20-21

  14. Poverty and non-poverty incidence and duration 4th Russia-India-China Conference, New Dehli, November 20-21

  15. Survival function of staying in poverty 4th Russia-India-China Conference, New Dehli, November 20-21

  16. Survival function of staying out-of-poverty 4th Russia-India-China Conference, New Dehli, November 20-21

  17. 4th Russia-India-China Conference, New Dehli, November 20-21

  18. Survival of staying in poverty, by settlement type 4th Russia-India-China Conference, New Dehli, November 20-21

  19. Survival of staying in non-poverty, by settlement type 4th Russia-India-China Conference, New Dehli, November 20-21

  20. Survival of staying in poverty, by period 4th Russia-India-China Conference, New Dehli, November 20-21

  21. Survival of staying in non-poverty, by period 4th Russia-India-China Conference, New Dehli, November 20-21

  22. 4th Russia-India-China Conference, New Dehli, November 20-21

  23. 4th Russia-India-China Conference, New Dehli, November 20-21

  24. Results • Symmetries • Presence of children weakens hh position • Households headed by retired males and females tend to be in a stronger position than headed by an adult man • Adult female-headed households are indistinguishable from adult male-headed households • High share of adults with university degree is an effective buffer against poverty: it reduces entry to poverty and increases exit from it. • Families that live in urban areas have lower chances to get into poverty and higher chances to get out of it. 4th Russia-India-China Conference, New Dehli, November 20-21

  25. Results • Asymmetries • larger families are doing better when getting out of poverty and average when slipping into poverty • higher share of unemployed reduces hazard from poverty but does not affect the rate of entry to poverty • higher share of employed in the public sector increases entry to poverty but is insignificant for poverty exit rate • involvement in subsistence farming is a sign of lower exit rate and has no influence on entry rate • bad health increases chances to enter poverty but does not affect chances to escape it • economic growth lowers chances to slip into poverty but also reduces hazards from poverty. 4th Russia-India-China Conference, New Dehli, November 20-21

  26. Conclusions and policy implications • Find significant asymmetries between determinants of entry to and exit from poverty • A better design of policies to fight poverty should distinguish between measures to prevent from slipping into poverty, and measures to get out of poverty for those who are poor. • Households in poverty in the period of economic upturn are to be paid special attention to • Confirm the role of educational and health endowments in preventing poverty 4th Russia-India-China Conference, New Dehli, November 20-21

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