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Should Russia implement a unitary policy for poverty reduction? In search of an optimal design for the means-tested programs. Daria Popova. 2 nd Microsimulation Research Workshop Bucharest, Romania 11-12 October 2012. Background.
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Should Russia implement a unitary policy for poverty reduction? In search of an optimal design for the means-tested programs. Daria Popova 2nd Microsimulation Research Workshop Bucharest, Romania 11-12 October 2012
Background • Decentralization of substantial areas of the welfare state in most OECD countries since mid 1970s. • Pros: maximizes available information for policy-makers, provides a better ‘tailoring’ of social programs according to local needs; stimulates policy innovation, with a ‘demonstration effect’. • Cons: in the context of welfare, policy divergence undermines inter-regional solidarity. In the extreme case, may lead to establishment of distinctive sub-state welfare regimes.
The Russian case • A drastic and painful restructuring in all areas of social protection. Welfare regime change: from the centrally managed pro-egalitarian to the decentralized neo-liberal model. • Multi-level nature of social protection funding and delivery (federal, regional, local levels). • The decentralization reform in 2005: the majority of responsibilities for legislative regulation and financing of the non-contributory social benefits and services transferred from the federal to the regional level (to be matched with respective intra-budgetary transfers).
Privileges are cash transfers or free/discounted services provided to vulnerable categories of the population, such as people with disabilities, war veterans, etc., but they also cover numerous privileges for groups based on their merits before the state and on their occupational status. Subject to federal legislation: Housing subsidies are provided to householdsif the share of housing costs inincome exceeds a certain regionally specified threshold (22% for most regions). A social supplement to pension is introduced in 2010 to top up the pension of the non-working pensioners up to the poverty line. Subject to regional legislation: Child allowances up to 16(18) years are provided to children in families with per capita income below the poverty line,or Minimum Subsistence Level. State social assistance is a program for the poorest households, or for households in difficult life situations. Non contributory programs in Russia Not means-tested programs (1.7% of the GDP) Means-tested programs (0.5% of the GDP)
Research question • Inefficiency of the existing social protection system. The available revenues are not always used for poverty reduction purposes. • The 2005 decentralization reform did not improve the situation. A majority of regions copied the federal laws whose effect ended in 2005 and adopted them as regional laws. • A few regions introduced improvements in the way programs are designed and implemented. However, the ‘best practices’ are not transferred across regions. The Federal Government is best placed to play such a role. • The objective of this study is to find an optimal design for the national anti-poverty programs using the experiences of the regions.
Simulation • Simulations are carried out using RUSMOD – the Russian tax-benefit MSM constructed on the EUROMOD platform. • Simulates SIC, income tax, federal benefits and means-tested benefits administered at the regional level as of 2010. • Input data are the 2010 wave of the Russian Longitudinal Monitoring Survey (6,323 households and 16,867 respondents from 32 out of 89 regions). • The design of the program used in of the particular region is integrated into the national tax-benefit system instead of all other existing regional benefits.
Key findings • Although non-contributory spending in Russia is high, little is allocated for the poor. Even less resources reach the poor because of poor targeting of the means-tested programs. Low spending and poor targeting translates in a modest impact on poverty reduction. • Redirecting these resources on the poor brings about a statistically significant improvements in poverty and inequality indicators even at the current level of spending. The most sizable impact is achieved by: • Applying stricter means-test (child allowances) or combining the means-test with categorical approach to filter the most vulnerable categories (social assistance). • Equalizing the rights for households living in different regions of Russia by adjusting the size of allowance using ppps (child allowances). • The marginalized poor require a special program offering assistance conditional on actions taken by households, such as participation in activation measures for able-bodied individuals.
