Association for Public Policy Analysis & Management

Almost 25 years have passed since the beginning of market reforms in Russia. Like other post-soviet countries, in the early 1990s Russia faced a period of sharp decline in real households’ incomes. Then a gradual growth of population well-being began. However, income inequality has been rather deep throughout all those years. Poverty headcount is still higher than 10% on average and differs a lot between territories and socio-demographic groups. Russian poverty has certain specifics: high risk of poverty is particular to young working families with children.

In this paper we analyse the effectiveness of child benefits from two angles. Firstly, we consider those benefits as an additional source of income for families with children. Secondly, we evaluate their impact on poverty incidence.

The study is based on pooled and panel household data from the Russian Longitudinal Monitoring Survey (RLMS-HSE), years 2003-2014 (about 20,000 observations).  We consider 2 types of benefits: (A) for children under 1.5 years, and (B) for children over 1.5 years. The type A benefits are mostly universal (categorical), and their size positively correlates with the mother’s previous earnings, though they have a ceiling. These benefits are regulated at the federal level. In contrast, the type B benefits are mostly means-tested and paid by regional (local) budgets. The type B benefits values differ between regions depending on their budget incomes. Nevertheless, on average type B benefit is 4 times less than type A benefit. As our data show, a share of the type A benefits in recipients’ household incomes recently has reached 15%, while a share of the type B benefits was about 5%.

We model the influence of child benefits of both types on (1) the risk (probability) of being poor, and (2) the level of a recipient’s average household income. We estimate 4 various econometric models (a pooled logit model and a panel logit model with random effects for probability of poverty; a pooled OLS model and a panel linear regression with random effects for average household income). Other, controlled factors influencing recipients’ household incomes and risk of poverty include type of settlement, family structure, education and employment.

The results turn out robust and show positive, though small influence of both types of child benefits over a household’s income. Both types of benefits – the benefit for children under 1.5 years (type A)  and the benefit for children over 1.5 years (type B) – decrease a household’s probability of being poor, all else being equal, but the effect is very small. The models’ coefficient estimates show that the factors apart from child benefits are the most important determinants of poverty. Overall, the study results reveal low effectiveness of child benefits in Russia and indicate a need for improved targeting.