Poverty Risk And Consumption Smoothing Abilities In Russia

This paper investigates to what extent Russian households have been able to protect their consumption against income shocks during the transition and in what manner the ability to smooth consumption is related to poverty risk. The authors use data from the Russian Longitudinal Monitoring Survey (1994-2004). Empirical analyses of such panels have often been based on differenced data in order to eliminate individual household effects. An innovative aspect of this paper is that they model households smoothing behaviour by means of an Error Correction Mechanism (ECM); this model explicitly distinguishes between short and long run dynamics of consumption and income and thus better exploits the information in the level data.