Income Shocks, Consumption, Wealth, and Human Capital: Evidence from Russia
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Using data from phase 2 of the Russian Longitudinal Monitoring Survey (RLMS) for 1994-96, 1998, and 2000-2003, the differences of consumption smoothing among households with different levels of wealth and human capital were examined. For the empirical analysis, the attrition bias was corrected with the inverse probability weighting method. The random coeffient model with average treatment effects was used to estimate the wealth and education effect on consumption smoothing. It was found that household income affects consumption. Furthermore, evidence was derived to support the hypothesis that household education is associated with more effectiveness in consumption smoothing. This observation was particularly true for urban households.
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