The Response of Interhousehold Transfers to Economic Shocks in Russia

Randall Kuhn, University of Colorado
Steven Stillman, RAND

This paper uses panel data from the Russian Longitudinal Mortality Survey (RLMS) to examine the response of inter-household transfers in Russia to economic shocks. While the determinants of transfers are important in any society with limited formal insurance mechanisms, they are particularly relevant for Russia, which has undergone a rapid and unexpected shift from formal to informal insurance during an era of economic uncertainty, small family size, and high adult morbidity. We use detailed panel data on economic activity, household budget, transfers, and specific income shocks to model household receipt and provision of transfers over time. Transfers are modeled as a response to yearly shocks to income or consumption from an overall panel mean. Conditional on the presence of a shock, models of past or potential future exchange allow us to examine the importance of reciprocal relationships and altruism in the pattern of transfers over time.