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Article

Changes in household composition as a shock-mitigating strategy

Economics of Transition. 2015. Vol. 23. No. 2. P. 371-388.
Abanokova K., Lokshin M.
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 trade-off between taking advantage of economies of scale and specialization when living with others, and individual privacy. Consumption smoothing is achieved by forgoing privacy during the crisis and results in increases in household size. Our empirical results suggest that members of households that experienced negative income shocks are more likely to move in with others compared to individuals residing in households whose income remained the same or increased.