Equivalence scales for measuring poverty in transitional Russia: Engel's food share method and the subjective economic well-being method

Abstract

This study estimates the equivalence scales for measuring poverty in transitional Russia using the Russia Longitudinal Monitoring Survey data of 1994 and 2002, i.e. before and after the 1998 economic crisis. To examine the robustness and plausibility of the two estimates, we compared the estimate results in both the periods. For constructing the equivalence scales, the costs of children and additional adults are estimated. Further, in order to investigate the most plausible equivalence scales for measuring poverty, the following two methods are employed for the estimations: Engel's food share method (Engel method) and the subjective economic well-being method (SW method). The estimation results show that the equivalence scales for a child, obtained from the Engel and SW methods, could be similar; however, the results for an additional adult are very different. It reveals that poverty evaluation is highly underestimated when the SW method is used. In conclusion, although the Engel method has a theoretical flaw, it might be more plausible than the SW method in the context of poverty evaluation for transitional Russia.

Acknowledgements

This research is funded by a Grant-in-Aid for Young Scientists (B) from the Japanese Ministry of Education, Culture, Sports, Science and Technology.

Notes

¹ Refer to the RLMS site for further details: http://www.cpc.unc.edu/rlms/

² The LR tests and the AIC show that the models controlling the age of the household head are much better; however, in the case of 2002, the Engel consumption model without a variable for the age of the household head is only slightly better. In view of this, we selected the models controlling the age of the household head.

Table 1. Welfare: share of food in total household expenditure

Table 2. Welfare: subjective economic well-being