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Change in the perception of the poverty line during times of depression : Russia 1993-96, Volume 1

Author:	Milanovic, Branko; Jovanovic, Branko;	Collection Title:	Policy, Research working paper ; no. WPS 2077
Country:	Russian Federation;	Date Stored:	1999/04/20
Document Date:	1999/03/31	Document Type:	Policy Research Working Paper
Language:	English	Major Sector:	(Historic)Multisector
Region:	Europe and Central Asia	Report Number:	WPS2077
Sub Sectors:	Non-Sector Specific	SubTopics:	Environmental Economics & Policies; Poverty Monitoring & Analysis; Rural Poverty Reduction; Economic Conditions and Volatility; Inequality; Services & Transfers to Poor; Poverty Impact Evaluation; Safety Nets and Transfers
Volume No:	1

Summary: During Russia's economic transition real income declined precipitously for most of the population. How were Russians' perceptions of the minimum income level needed to survive affected by such a rapid decline in their incomes? Based on data collected from repeated surveys of individuals during the period from March 1993 to September 1996, the authors find that the subjective estimate of that minimum income for an adult Russian decreased by about 1.7 percent each month. This sharp reduction in the subjective poverty line meant that proportionately fewer people felt poor. However at all times at least 60 percent of the population considered itself poor. In other words, the percentage of the "subjectively poor" tended to decline as the perception of the needed minimum was reduced. In this somewhat unusual situation, the percentage of the subjectively poor decreased more or less in step with a reduction in people's real income. Only larger-than-usual income decreases were needed to jolt the population - that is, to keep the percentage of the subjectively poor unchanged. The percentage of the self-addressed poor was always lower than the percentage of the poor according to the "social" subjective poverty line. This suggests that pockets of the population regarded their own income as adequate although in the public perception they were poor. This in turn suggests two mechanisms for adapting to worsening circumstances: 1) a reduction in what people perceive to be the minimum income needed for survival and 2) the existence in the population of pockets of people who demand even less than others.


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