ESSAYS ON ECONOMIC INEQUALITY IN RUSSIA

There can be little doubt regarding the importance of inequality problem in Russia. Within the scope of this thesis, I have focused on documenting and understanding trends in inequality in Russia from 1994-2015. The four chapters analyze different aspects of inequality in Russia. The second chapter of the thesis aims at documenting and explaining changes in income inequality in Russia from 1994-2015. First, I provide evidence for inequality and poverty trends in Russia. Second, I provide a detailed examination of the main determinants of the above-mentioned changes. I document that changes in socio-demographic characteristics together with labour market employment of individuals have not affected changes in income inequality, poverty and income levels. Changes in income sources, in particular earnings and pensions, are the key drivers of changes. A fall in income inequality and poverty and increase in income levels is the result of increasing real levels in pensions and public sector earnings and a decreasing dispersion of private sector earnings. The third chapter focuses on the two dimensions of inequality: income and consumption. First, I provide evidence on the inequality trends in income and consumption. Second, I uncover evidence on the joint analysis in income and consumption inequality. The analysis reveals large differences in consumption across income levels and significant differences in consumption changes given income. I document that low and high income top savers have not changed their consumption behavior. The fourth chapter of this thesis addresses the issue of adjusting income to regional price differences by suggesting an approach to estimating cost-of-living indices without data on prices. The proposed approach relies on household survey data only. The key idea of this approach is that the cost-of-living indices between regions are reflected in average differences in income among homogenous individuals. Homogenous individuals experience similar financial needs, which are captured by observed individual characteristics, and the same level of satisfaction with economic conditions. A matching technique is applied to pair individuals from different regions. Finally, the last chapter focuses on the relationship between income changes and political trust in Russia by answering the following question: Do income changes matter for political trust? The paper shows that income changes do not matter for political trust. Furthermore, neither income gains nor income losses play a significant role in the relationship between income changes and trust. I, however, find that short-run income changes from 2012-2011 are positively associated with political trust and that this link is stronger for lower incomes.