“Inequality and Poverty Dynamics Across
the Russian Regions in 1992-2000”
Ruslan Yemtsov, World Bank
Natalia Miteva
PUAF 699I
Maryland School of Public Policy
Contents
• Yemtsov, “Inequality and Poverty Dynamics Across the
Russian Regions in 1992-2000”: Main Findings
• Regional Inequality in Russia
– Data and Economic Literature
– Analysis
• Question 1: More Inequality Between the Unequal?
• Question 2: More Equally Unequal?
– Factors Determining Regional Inequality
– Analysis Summary
• Other Literature : Increasing Inequality in Transition
Economies
Main Findings
• Inequality in Russia is trended towards an internationally
high level
• The share of inequality coming from the between-regions
component is large, growing, and accounting for 1/3 of
total income inequality
• The dynamics of poverty in Russia will increasingly
depend on inter-regional differences in the average
incomes
• There is evidence of convergence in inequality for main
welfare indices
Map of Russia’s Regions
Regional Inequality in Russia:
Data and Economic Literature
• When measured by the ratio of top-to-bottom decile of regions,
regional economic inequalities in Russia in 1997-2000 are at par
with differences between countries in the EU, and much bigger than
those between states in the US.
Regional Inequality in Russia:
Data and Economic Literature
• Authors agree that the transition period has been
characterized by economic inequality among Russia’s
regions
• Studies used the coefficient of variation (in industrial
output, housing availability, and consumption of food
items) as an inequality measure, but did not account for
the total # of population in the regions
• Distinction between regional inequality and regional
polarization (Fedorov, 2002)
Question 1:
More Inequality Between the Unequal?
•
•
•
Although there has been some variation in income inequality across regions
in 1994-1999, average income inequality in a region in 1999 was not higher
than in 1994
No increase in regional variation in income inequality either
However, the range of income inequality across regions suggests that,
while in some regions in Russia people can be equally poor, in other
they are unequally well-off
Republic of KarachaevoCherkessk
Moscow
Gini
0.212 (lowest)
0.626 (highest)
Poverty rate
64.6%
23.3%
Decomposing Inequality to
Within- and Between-Regions
1994
1995
1996
1997
1998
1999
Total inequality: per capita
incomes
0.297
0.282
0.316
0.337
0.314
0.329
of which
Between regions: per capita
incomes
0.073
0.076
0.083
0.079
0.088
0.103
Between regions as a share
of total: p.c. incomes
25%
27%
26%
23%
28%
31%
Contribution of Moscow and St.
Petersburg as a share of total
inequality in p.c. incomes
32%
35%
34%
28%
29%
31%
Gini index for per capita
incomes
0.424
0.418
0.437
0.445
0.432
0.441
Gini index w/o Moscow and
St. Petersburg
0.348
0.331
0.353
0.378
0.364
0.367
Inequality decompositions using Theil indices for per capita real money incomes (selected indicators)
Question 2:
More Equally Unequal?
Is there convergence in inequality among the
Russian regions?
The literature suggests:
– No absolute convergence for nominal per capita income between
1985 and 1999
– Only weak convergence in regional gross products and industrial
output per capita (1994-99)
– But some evidence of conditional convergence for per capita income
– And strong conditional convergence in gross regional products and
industrial output
Question 2:
More Equally Unequal?
• Testing for inequality convergence across regions: regressing
observed changes over time in inequality (measured by Gini) on its
initial values*
• Result: some evidence of convergence (graph)
• Evidence suggests the convergence process is slow
Factors Determining Regional Inequality
• Endowments and initial conditions of the regions
• Restructuring policies (advanced reformers vs. lagged
regions)
• Economic shocks
• Transfers (transfer dependent vs. “independent” regions)
Factors Determining Regional Inequality -Empirical Results
Regional trends in inequality depend on initial conditions
(Gini strongly related to its initial level)
Effect on
inequality
Communists being in charge
Price controls
Regions which inherited large industrial sectors
Economic shocks
Variables characterizing the business environment and the
degree of restructuring
Wage arrears
Transfers
Regional Inequality in Russia:
Analysis Summary
• The analysis for means convergence in Russia has
failed to reveal strong evidence of absolute
convergence, although the regions are slowly moving
towards different steady state growth rates and per
capita incomes
• A decomposition of inequality shows evidence of
increasing between-region inequality over time
• Inequality dynamics are affected by a combination of
many factors, which determine how fast the regions
move to a distribution determined by market forces
Other Literature
Yemtsov and Mitra, “Increasing Inequality in Transition
Economies: Is There More to Come”? World Bank, 2006
Adds to the story of inequality in Russia
Between-Group Inequality
Relative importance of between-group inequality over time
in Russia
Rising Inequality in Russia and China:
Is There a Lesson in the Similarity?
China: Increases in Gini coefficients for per capita incomes
Rural
Data
Urban
1988
1995
2001-2
1988
1995
2001-2
Ravallion and Chen
(2004)
SSB
0.297
0.334
0.365
0.211
0.283
0.323
Khan and Riskin
(1998, 2004)
CASS
0.338
0.416
0.375
0.233
0.332
0.318
SSB – State statistical bureau based on HH survey; CASS – Economic Institute of the Chinese
Academy of Social Science Survey
Russia: Gini indices for per capita income
Eurostat data
1987-90
1992
1995
1997
1999
2001
2003
0.259
0.289
0.381
0.381
0.399
0.396
0.404
Rising Inequality in Russia and China:
Is There a Lesson in the Similarity?
• Rural-urban gap:
– Determinants of inequality in
China different – driven by
rural-urban gap (37% in 2000)
– In contrast, the FSU saw a
reversal of this gap in the
transition years
• Wage inequality:
– In 1989, returns to education
negligible in China but not in
Russia
– Later, an increasing education
premium became a stronger
driver of wage increases in
China, albeit from a lower
base
– In Russia, it played a smaller
role in explaining wage
inequality
Increasing Inequality in Transition
Economies: Conclusion
Would faster growth in the transition countries of Eastern
Europe and the FSU be accompanied by an increasing
inequality on a scale similar to that in China?
Probably not.
“Inequality and Poverty Dynamics Across
the Russian Regions in 1992-2000”
Ruslan Yemtsov, World Bank
Natalia Miteva
PUAF 699I
Maryland School of Public Policy