CitationHoffmeister, Onno (2003). The cost of living and real income differentials in Russia’s provinces. Arbeitspapiere des Osteuropa-Instituts der Freien Universität Berlin Arbeitsbereich Politik und Gesellschaft Working Paper No. 46/2003.
AbstractDuring the Socialist era food consumption was exceptionally cheap in Russia. Since prices for nutritional products were fixed at a level below the market prices in all Russian provinces, households did not face real difficulties in purchasing their basic nutritional needs. With the aim to smoothen regional income disparities and in accordance with the "doctrine of the
compensation of the economic and social development level", large parts of the public budget were transferred from economically developed provinces to less developed ones. Thus, it was unlikely that large regional differences in the purchasing power of incomes appeared. The situation changed in the aftermath of the Gaidarian reforms in 1992, when the system of central economic planning and controlled prices was dissolved. This paper investigates how regional income and cost of living differentials have developed ten years after the introduction of the reform programme. What are the factors that can be made responsible for differences in food prices and incomes? Have these differences increased or decreased during
the second half of the 1990s? Such questions are not easy to answer, since it is difficult to obtain reliable Russian data on the two variables defining the ‘real’ value of income: the cost of living and nominal incomes. For the mid 1990s Hanson
describes the situation as follows:
"Regional differences in real personal income levels are exceptionally hard to measure. The raw data on incomes are full of gaps; unreported income looms large and is no doubt more important in some regions than others, and regional divergences in price levels are massive."