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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

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

motivation
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

literature
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

research questions
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

slide5
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

slide7

Comparing Panel Sample with Period Samples (Mills, 2007)

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

study measures
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

poverty rates rlms definition
Poverty rates (RLMS definition)

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

methodology
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

methodology11
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

panel statistics
Panel statistics

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

gaps in data record an example
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

poverty and non poverty incidence and duration
Poverty and non-poverty incidence and duration

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

survival function of staying in poverty
Survival function of staying in poverty

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

survival function of staying out of poverty
Survival function of staying out-of-poverty

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

survival of staying in poverty by settlement type
Survival of staying in poverty, by settlement type

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

survival of staying in non poverty by settlement type
Survival of staying in non-poverty, by settlement type

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

survival of staying in poverty by period
Survival of staying in poverty, by period

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

survival of staying in non poverty by period
Survival of staying in non-poverty, by period

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

results
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

results25
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

conclusions and policy implications
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