Changes in Household Composition as a Shock-Mitigating Strategy
20 Pages Posted: 7 Nov 2013 Last revised: 8 Nov 2013
Date Written: November 7, 2013
This paper uses data from the Russian Longitudinal Survey that span the two recent economic recessions of 1998 and 2008 to study the effect of declining incomes on household composition. We hypothesize that individuals face a tradeoff between taking advantages of economies of scale and specialization when living with others and individual privacy. Consumption smoothing is achieved by forgoing privacy during a crisis and results in an increase in household size. Our empirical results suggest that members of the households that experienced negative income shocks are more likely to move in with others than households whose income remained the same or increased.
Keywords: household structure, coping strategy, macroeconomic shocks, Russia
JEL Classification: J10
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