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Regular version of the site

­­­Economic Mobility and the Dynamics of Poverty

Priority areas of development: economics
2013
The project has been carried out as part of the HSE Program of Fundamental Studies.

This study on poverty focuses on an analysis of two main areas: 1) how economic shocks impact household size and structure, and 2) the impact of migration on workers' welfare and their position in the labour market in both donor and recipient countries. During the last 15 years, the Russian economy experienced two recessions that caused a significant decline in the well-being of the Russian population. In the face of such economic setbacks, Russian households struggled to find ways to maintain their standard of living.

Households employ many mechanisms to adapt to shocks. They may respond by using their savings and selling assets, utilising formal and informal borrowing, reallocating resources between or within households through public or private transfers, reverting to migration, adjusting their labour market activity, and turning to subsistence agriculture. A coping strategy that receives little attention in literature is the adaptation of household size and structure in response to changing economic conditions. Another area of research involves studies on labour migration in the CIS region. This area of research has attracted enormous interest, and the amount of literature on this topic is growing each year. However, migration processes in the CIS are understudied. In particular, little research exists on the issue of selection into migration with regards to Tajik households and individuals. Selection is an important issue in migration literature, because it shapes migration's impact on the sending country. Migrants may be the unemployed, thus making migration a way of coping with macroeconomic instability. Or migrants may be the most productive and motivated of individuals, so their migration could cause a depression for local businesses and a lack of labour supply in the country. In addition, selection determines how successful a migrant’s performance will be on the receiving country’s labour market.

Research Object: Russian households, Tajik households

Research Purpose:

The purpose of this report is twofold. In the first part of our report, we provide new empirical evidence on how households may respond to economic shocks, focusing on the role of changes in household size and composition. The second part of our research project investigates the issue of migrants’ selection in Tajikistan on both the household and individual levels.

Empirical Base of the Research:

We use data from the Russian Longitudinal Survey that spans the two recent economic recessions of 1998 and 2008 to study the effect of declining incomes on household composition. We hypothesise that individuals face a tradeoff between 1) individual privacy and 2) taking advantage of economies of scale and specialisation when living with others. Consumption smoothing is achieved by forgoing privacy during a crisis and results in an increase in household size. We use data from the 2007 and 2009 rounds of the Tajik Living Standards Survey (TLSS) to analyse labour migration. This survey is based on a representative sample of Tajik households. It is a unique source of information on different aspects of life in the country, including migration. It is largely free of problems with bias towards registered migrants, as happens in surveys performed in the receiving country. We want to emphasise that our research is not representative for all migrants from Tajikistan and is limited to a group of migrants newly engaged in migration after the crisis of 2008. This group of recent migrants is compared to those who did not experience migration, neither in 2007, nor in 2009. This is typical of any research that uses pre-migration information in a household panel data setting: the conclusions concern only those migrants who leave a country during a certain period. Thus, in our work, we describe a certain portion of the flow of migrants – those newly engaged in migration, not the whole flow of migrants or the whole supply of migrants.

Research Results:  We use two approaches to estimate the impact of income shocks on household structure. In our first approach, we assume that the choice to move in with relatives is exogenous to income shock and view shock as a treatment. With our second approach, we control for the endogeneity of household consumption with respect to household structure by using the instrumental variable method. Both methods demonstrate that households that experienced a decline in their incomes after the 1998 and 2008 crises are more likely to increase their size compared to households whose post-crisis income did not change or increased. Our empirical results indicate that a change in household structure is an important mechanism for coping with the negative impact of a crisis. In our second project, we first analyse the household migration decision. We find that food consumption is a wealth characteristic that impacts the decision to migrate: higher consumption increases the probability of migration. This is probably a sign of the liquidity constraint being faced by Tajik households. In addition, we find that such community characteristics as the distance to the capital, the unemployment rate, and previous migration are important. Demographic characteristics such as household size, and the portion of women, children, and pensioners are significant. Surprisingly, apart from being Tajik, the household head's characteristics are not important. After analysing household selection, we characterise the type of individual selection into migration. To do this, we calculate the counterfactual wage for the new migrants in 2009. We find that migrants slightly negatively self-select into migration. The extent of negative selectivity increases when household characteristics are included.

Implementation of the Research Results: Policy measures that would help households implement their own strategies for coping with major income fluctuations due to structural changes could be effective in improving the well-being of the Russian population. Such policies may include simplifying procedures related to the geographical transfer of health insurance and pensions, developing programs for part-time and temporary employment, and improving information services for individuals wanting to rent out their housing.

The type of selection is important for policymakers. The negative selection found by our study is a signal to Russian authorities that a better selection procedure should be applied for arriving migrants. Such policies could improve the quality of the country's manpower. For the sending country, negative selection could mean that migration is a way for the less talented and qualified to find a decent job.

International Partners: World Bank

Publications:


Abanokova K., Lokshin M. Changes in household composition as a shock-mitigating strategy / NRU Higher School of Economics. Series WP BRP "Economics/EC". 2013. No. 38.
Чернина Е. М., Локшин М. М. Мигранты на российском рынке труда: портрет и заработная плата // Экономический журнал Высшей школы экономики. 2013. Т. 17. № 1. С. 41-74.