Published online by Cambridge University Press: 02 May 2019
We present an analysis of interregional consumption risk sharing in Russia between 1999 and 2009 using novel estimation methods. In addition to standard fixed-effects panel estimations, we use system and difference GMM estimators to reflect time dynamic properties and possible endogeneity between output and consumption. Furthermore, we apply spatial models that control for spatial dependence across regions. The results show that regional consumption deviations from the national average are highly persistent in time and space. Nevertheless, the regional consumption risk sharing in Russia is relatively high with 70%–90% of idiosyncratic risk being smoothed. Finally, fiscal policy and the degree of financial development appear to contribute to the consumption smoothing.
We benefited from comments and suggestions made by Lidwina Gundacker, Martin Siddiqui, Benedikt Fritz, James Watson, Riikka Nuutilainen, Juha Junttila, Igor Bagaev, Betina Bökemeier Richard Frensch, Matthias Firgo, Gunther Maier, Mexin Guo, Makram El-Shagi, and other participants of the Meeting of the German Association for East European Studies in Berlin, October 2016, and 3rd HenU/INFER Workshop on Applied Macroeconomics in Kaifeng, March 2017. Jarko Fidrmuc appreciates also the hospitality of Leibniz Institute for East and Southeast European Studies (IOS) in Regensburg, which allowed him to work on this project. This research was funded by the European Social Fund No. 09.3.3-LMT-K-712-01-0123. The standard disclaimer applies.