Protecting energy intakes against income shocks

Abstract

Whether and how changes in economic circumstances or household income affect individuals’ diet and nutritional intakes is of substantial interest for policy purposes. This paper exploits a period of substantial income volatility in Russia to examine the extent to which, as well as how individuals protect their energy intakes in the face of unanticipated shocks to household income. Using rich data from the Russia Longitudinal Monitoring Survey, our results suggest that households use substitution, disproportionally cutting back spending on non-foods to protect spending on foods, change the composition of the consumption basket, and increase the consumption of ‘cheaper’ calories. Taken together, however, we find that total energy intakes as well as the nutritional composition of the diet are almost fully protected against income shocks. Specifically, we find that 12–16% of the effect of permanent income shocks on food expenditures is transmitted to energy intakes, with 84–88% protected through insurance mechanisms.