Persistent poverty in Russia

Poverty is one of the most severe problems in modern Russia. The breakup of
the Soviet Union in 1991 caused a crucial redistribution of income. As a result of
this redistribution some people have become extremely rich, but others have fallen well below the poverty line. The subsequent years of transition have made this tendency more apparent. An even more serious problem is that among all poor households there is a big share of households that are poor for quite a long time, i.e. the longer-term (persistently) poor. It is this category of the persistently poor that is the most vulnerable category in each society. In the Soviet Union this category consisted of people who represented the social stigma (alcoholics, parasites or disabled). However, since the beginning of transition, some households, which were relatively well-off before, have become persistently poor. According to GosKomStat estimations (see Table 1), the number of poor has fallen between 1992 and 1998, but the age structure has changed. In both 1992 and 1998 children were at high risk of being poor. What is more worrisome in these statistics is that the share of poor working-age people, especially women, has risen. Indeed, as Table 1 shows, the share of people of both sexes from 31 to pension age has risen by 5%. Although these figures show the summary statistics, not the dynamics of poverty, longer-term poverty seems to demonstrate the same tendency. In fact, the defining characteristics of poverty in Russia since the beginning of transition is that the poor are mainly the working poor, particularly working poor with children. Many of them work in government controlled sectors like nuclear power, theoretical science, coal mining or military-industrial complex, which face reduced demand for their production or reduced government subsidies.
The aim of this paper is to investigate persistent poverty in Russia and to
determine the major micro and macro factors that cause a household to be longer-term poor. Precise determination of the category “persistently poor” and
distinguishing it from the category “temporarily poor” will enable programs of
social assistance to the poor to be better targeted. The problem of proper targeting
is especially vital from the point of view of the burden for the government budget.
If the longer-term poor could be accurately identified, resources could be directed
to them, reducing the overall fiscal burden of generalized cross-subsidies and non-
targeted benefits.
The methodology we use is standard duration-data analysis. We estimate
proportional-hazard Weibull models with three groups of covariates: demographic,
regional and economic. The primary source of data for this research is the Russian Longitudinal Monitoring Survey (Round 5-8). The paper is organized as follows: Section Two is a literature review. Section Three is dedicated to data description. Section Four describes the methodology. Sections Five outlines the main results obtained. In Section Six conclusions are drawn.

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