Change in the Perception of the Poverty Line During the Times of Depression: Russia, 1993-96

Abstract

Economic transition in Russia was accompanied by a precipitous decline in real income for most of the population. How was people's perception of a minimum income level needed to survive affected by such a rapid decline in their incomes? Based on individual-level data collected from repeated surveys over the period March 1993-September 1996, we find that the subjective estimate of a minimum income for an adult Russian decreased by about 1.7 percent each month. This sharp reduction of people's subjective poverty line in face of a decrease in real income meant that the percentage of the population feeling poor went down, even if it remained at a very high level (over 60 percent) throughout the entire period. This is in marked contrast with a simultaneous increase in the percentage of the "objectively" poor--that is those whose income was less than a given real poverty line.