World Bank Poverty Net

This paper analyzes regional data on inequality and poverty in Russia over the period 1994-2000 using published series from the regionally representative Household Budget Survey. The paper finds that the share of inequality in Russia coming from the between-regions component is large (close to a third of the total inequality), growing over time, and accounting for most of the increase in the national inequality over 1994-2000. The paper demonstrates an absence of inter-regional convergence in incomes across Russian regions using various techniques, such as beta, sigma convergence and the transition matrix approach. On the other hand, the paper finds an evidence of convergence in the inequality within regions, which is trended towards an internationally high level. Based on these two findings, the paper projects dynamics of inequality and poverty in Russia over a ten years time horizon. Projections show that if the observed trend is to continue in the future, by 2010 the absolute majority of the Russia’s poor will be concentrated in few permanently impoverished regions, while relatively more affluent regions will become virtually free of poverty. Finally, the paper relates fluctuations in the inequality within regions to a set of factors determining the speed of restructuring at the regional level, classified into four broad categories: endowments and initial conditions, preferences, policies, and shocks; among these factors short run fluctuations of the unemployment rate are revealed as significant and strong correlates of inequality.