Income Inequality and Propensity to Consume in Russia’s Regions

Tatyana Ivakhnenko and A. V. Polbin ()
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A. V. Polbin: Russian Presidential Academy of National Economy and Public Administration

Regional Research of Russia, 2022, vol. 12, issue 3, 378-385

Abstract: Abstract This paper empirically examines the impact of income inequality on the average propensity to consume using data for 79 Russia’s regions for the period of 2002–2020. Using several alternative specifications for the APC and econometric methods, we find that the average propensity to consume is higher in regions with higher income inequality, regardless of the estimation method. This result is consistent with some previous studies, for example, for US and cross-country data. We add GRP per capita, inflation and the share of population over the working age in the estimated model to control the impact of other factors on the average propensity to consume in the region. The positive impact of income inequality on the average propensity to consume obtained for Russia’s regions could be related, firstly, to a large share of consumption in the income of the rich, and secondly, to the mechanism of the relative income hypothesis. This study reveals another negative consequence of increasing income inequality in Russia, namely the growing average propensity to consume among regions.

Keywords: average propensity to consume; income inequality; Gini index; Russia’s regions (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1134/S2079970522700204

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