The impact of foreign trade shocks on well-being of Russian households: Microsimulation approach

Abstract

In recent years, there have been significant fluctuations in world prices for essential goods, many of which have a significant share in the consumption basket of households. In this study, we analyze how fluctuations in world wheat prices affect the well‐being of Russian households. We provide estimates of average welfare losses and of welfare losses in different parts of welfare distribution. We also identify which socio‐demographic groups bear the brunt of such price shocks. For evaluation, a micro‐ simulation approach to model the expenditure part of household budgets is used. The empirical basis is the data of the Russian Longitudinal Monitoring Survey (RLMS) for 2020. When modeling a 50% rise in prices for bread, flour and pasta, the average losses amounted to 2.9% of total household expenditures, the largest losses, 5.5% of total expenditures, fall on households in the first decile. Those living in rural areas or urban‐type settlements, as well as households headed by a female pensioner, suffer losses at the level of 3% of total household expenses. Families with children are not among the most vulnerable groups with rising prices for bread, flour and pasta.