Household consumption and labor supply response to economic shocks in Russia

This dissertation consists of three chapters. The first two chapters are empirical studies on household consumption and labor supply response to economic shocks, using the data from the Russian Longitudinal Monitory Survey (RLMS). The third chapter studies the econometric estimation methods in an unevenly spaced panel data. Chapter 1 . "Risk, Consumption, Wealth and Human Capital: Evidence from Russia". This paper investigates Russian households' consumption response to the income shocks. In particular; this paper examines the effects of education and wealth on the ability of the households to smooth their consumption. A random coefficient model of average treatment effect that allows for endogenous variables is implemented in the estimation. After correcting for the possible sample attrition by the inverse probability-weighting method, this paper finds that consumption is only partially protected from idiosyncratic shocks. The analysis also provides evidence that households in the wealthier group can smooth their consumption better. In addition, education of the household members in the high asset group increases their consumption smoothing ability while no education effect is detected in the low asset group. Chapter 2 . "Multiple Job Holdings As a Way to Smooth Consumption: Labor Response to Wage Arrears Among Russian Couples". This paper tests the hypothesis that labor supply in the form of multiple job holdings was effective in the attempts of households to maintain consumption when their income was declining during the Russian economic transition period. The theoretical framework shows that the possibility of holding secondary job(s) for an individual increases with the possibility of getting wage arrears in their primary job. The paper applies the "Chamberlain" approach to a dynamic probit model of the decision to hold multiple jobs. It finds that both husbands and wives are more likely to take secondary informal jobs when they have wage arrears shocks in their primary jobs. The combined regression results from the reduced form and structural estimation of households consumption suggest that the insignificant effect of wage arrears on consumption reflect, to certain extent, the adjustment of secondary job holdings. Chapter 3 . "Estimation With or Without Straight Exogeneity Assumption in Unevenly Spaced Panel Data". This paper studies the econometric estimation methods for unevenly spaced data, which is very common in the survey data conducted in developing countries. Classic minimum distance, and one-step GMM estimators are used to impose the non-linear parameter restrictions in dynamic models. The paper also shows that these two methods also can be applied to estimations without strict exogeneity assumption.