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Income transfers in Russia : problems and some policy directions

Barr, Nicholas (1993) Income transfers in Russia : problems and some policy directions. Economics of Transition, 1 (3). pp. 317-344. ISSN 0967-0750

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The decision to move to a market economy sets in train two major forces. 1. The fall in output has led to a reduction in personal incomes and created a fiscal crisis. 2. A widening earnings and income distribution is a result of wage and price liberalisation, and is an inherent part of the reform. The change leads to rising unemployment and increased poverty. It also has major administrative implications. Thus, by its very nature, the reform process creates forces which require a major reshaping of the social safety net to address three major issues: poverty relief, cost containment, and strengthening administrative capacity. Of the recommendations, five are paramount. 1. The minimum level of the major benefits should be at or above subsistence and, at least in the short run, should be fully protected against inflation. 2. Cost containment implies that, in the short run, benefits above the minimum should be protected only to the extent that resources permit; and, to the maximum extent compatible with political realities, the right to combine full old age or invalidity pension with more or less full-time work should be withdrawn for individuals below normal retirement age. 3. Administrative capacity should be strengthened. In particular, the administration of cash benefits requires modernisation. Such a process is crucial both to ensure effective benefit delivery, and to containing costs. 4. Social insurance and pension contributions should be shared between worker and employer, with the worker's contribution appearing on his/her payslip. 5. Short-run problems should be addressed in a manner consistent with long-run policy design. In particular, as soon as economically and administratively feasible, the relationship between social insurance benefits and individual contributions should be strengthened.

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Additional Information: This is an electronic version of an Article published in The Economics of Transition 1 (3) pp. 317-344 © 1993 Blackwell Publishing. LSE has developed LSE Research Online so that users may access research output of the School. Copyright © and Moral Rights for the papers on this site are retained by the individual authors and/or other copyright owners. Users may download and/or print one copy of any article(s) in LSE Research Online to facilitate their private study or for non-commercial research. You may not engage in further distribution of the material or use it for any profit-making activities or any commercial gain. You may freely distribute the URL ( of the LSE Research Online website.
Divisions: LSE Health
Subjects: H Social Sciences > HG Finance
H Social Sciences > HB Economic Theory
Date Deposited: 15 Feb 2008
Last Modified: 20 Nov 2019 06:20

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