Child Benefits and Poverty: The Case of Russia

Abstract

25 years have passed since the beginning of the market reforms in Russia. Like other post-soviet countries, in the early 90s, Russia faced a period of sharp decline in real household incomes followed by gradual growth of the welfare of the population. However, income inequality remained a burning problem throughout this time. The poverty headcount is still about 13% on the average and varies greatly depending on territories and socio-demographic groups. Russian poverty has clear specifics: there is a high risk of poverty for families with children. This paper analyses effectiveness of child benefits from various perspectives. We estimate the benefits’ impact on the poverty of families with children using the concepts of absolute, relative and subjective poverty. The study is based on the pooled and panel household data from the Russia Longitudinal Monitoring Survey conducted by the Higher School of Economics (RLMS HSE) in 2003–2015. We assess the influence of the child benefits on the probability of poverty using various econometric models. The results are robust and show that the system of child benefits all in all reduce the risk of absolute and relative poverty of the households. However, the subjective perception of poverty is positively correlated with the benefits. The study also reveals leaks and significant gaps in the coverage of poor families with the system of child benefits. Overall, the studybn confirms low effectiveness of the child benefits system in Russia and indicates a need for improving its targeting.