Consumption smoothing strategies in Russia: An empirical investigation

Geranda Notten, Maastricht Graduate School of Governance

The ability of a household to ensure that it has sufficient means to fulfill the (basic) needs of its members, today as well as tomorrow, is a key aspect of economic well being. Our aim is to explore how households smooth consumption, which institutions they use and whether consumption smoothing behavior differs between groups of households. In this paper we first develop a conceptual framework to study households’ consumption smoothing strategies in a country. Using the framework as a guide, we subsequently explore evidence of consumption smoothing strategies using data from the Russia Longitudinal Monitoring Survey (RLMS) from 2000-2003. Popular smoothing strategies in Russia are; borrowing and lending activities between households, not paying utility bills, gift giving or receiving within families, social protection benefits and household food production. Financial markets do not seem to play a substantial role while many indicators suggest that especially poorer and rural households have problems accessing the (formal) labor market or with starting up a business. We argue that this type of analysis is a logical starting point to investigate consumption smoothing behavior in a given country or community; it allows for a broad scope of household smoothing actions and it can be done using existing sources of information. Moreover, our analysis is useful when considering the role, scope and type of various government interventions such as social and economic development policies.

Venue: Keizer Karelplein 19, Maastricht

Date: 07 February 2007

Time: 16:00  CEST