Rich and Powerful? Subjective Power and Welfare in Russia

Transcription

1 Rch and Powerful? Subjectve Power and Welfare n Russa Mchael Lokshn and Martn Ravallon 1 Development Research Group, World Bank Abstract: Does empowerment come hand-n-hand wth hgher economc welfare? In theory, hgher ncome s lkely to rase both power and welfare, but heterogenety n other characterstcs and household formaton can ether strengthen or weaken the relatonshp. Survey data on Russan adults ndcate that hgher ndvdual and household ncomes rase both self-rated power and welfare. The ndvdual ncome effect s prmarly drect, rather than through hgher household ncome. There are dmnshng returns to ncome, though ncome nequalty emerges as only a mnor factor reducng ether aggregate power or welfare. At gven ncome, the dentfed covarates have strkngly smlar effects on power and welfare. Keywords: Subjectve welfare, power, ncome, Russa JEL: D6 World Bank Polcy Research Workng Paper 2854, June 22 The Polcy Research Workng Paper Seres dssemnates the fndngs of work n progress to encourage the exchange of deas about development ssues. An objectve of the seres s to get the fndngs out quckly, even f the presentatons are less than fully polshed. The papers carry the names of the authors and should be cted accordngly. The fndngs, nterpretatons, and conclusons expressed n ths paper are entrely those of the authors. They do not necessarly represent the vew of the World Bank, ts Executve Drectors, or the countres they represent. Polcy Research Workng Papers are avalable onlne at 1 Address for correspondence: Martn Ravallon, World Bank, 1818 H Street NW, Washngton, DC, 2433, e-mal:mravallon@worldbank.org, Mchael Lokshn, World Bank, 1818 H Street NW, Washngton, DC, 2433, e-mal:mlokshn@worldbank.org. The authors are grateful to Monca Das Gupta, Mead Over, Vjayendra Rao, Domnque van de Walle, and semnar partcpants at the World Bank for ther comments.

2 1. Introducton Empowerment mght be vewed as solely a matter of the freedoms permtted to all by the laws and nsttutons that preval n a gven socety. However, t s evdent that dfferent people have dfferent abltes to drectly nfluence the actons of others and that ths s so wthn a gven socety, wth one set of laws and nsttutons. In short, there s nequalty of personal power, just as there s nequalty of economc welfare. Some polcy-orented dscussons have taken ths observaton further to argue that redressng power nequalty by takng actons that selectvely empower those wth lttle power should be seen as a dstnct polcy objectve, sde-by-sde wth the more tradtonal ams of reducng poverty and nequalty n terms of economc welfare. For example, the World Bank s (2) report Attackng Poverty puts the need for empowerment on the same level as promotng (economc) opportunty and securty. Assessng the empowerment role for publc polcy calls for a deeper understandng of how power s assgned to people. Does lack of power n a gven socety come hand-n-hand wth ncome poverty, or s t determned dfferently? Is there a trade-off, such that some of the thngs that enhance economc welfare are not also good for ndvdual empowerment? Does focusng on empowerment dmnsh the ncome focus of manstream development efforts? What extra mplcatons does empowerment hold for ncome-redstrbuton polcy? Does the fact that dscussons of empowerment are often lnked to gender nequaltes reflect dfferences n the perceptons of men versus women about power? Ths paper explores one possble source of clues on the answers to these questons, namely by lookng at the expressed perceptons of people about ther own power to see how 2

3 those perceptons compare wth both subjectve and objectve ndcators of ther welfare. We examne how much agreement there s between subjectve power and welfare n data for Russa, and examne whether there s any sgn that dfferent covarates matter. Although there has been debate on how much aggregate economc growth rases aggregate subjectve welfare (the total number of people who feel satsfed wth ther lves, for example), a postve effect s stll to be expected at the ndvdual level and there s ample supportve evdence for that effect. 2 But we know less about ncome effects on perceved power, and the role of non-ncome factors, such as gender, age, ethncty and locaton. Relyng on expressed perceptons brngs some concerns. Possbly a person s feelng of power s a fcton n realty, and smlarly for perceved welfare. However, whle there s undoubtedly nose n subjectve data, t can stll dentfy real effects that are llusve otherwse. 3 And wthout the percepton of power to nfluence thngs that matter, how can t be sad that there s real empowerment? The percepton of power s surely necessary, though not suffcent. There are antecedents to our use of subjectve data, spread over a number of dscplnes. Economsts have tradtonally ressted the use of subjectve questons, though there are exceptons. The lnks between subjectve welfare and ncome have attracted the attenton of economsts, ncludng Easterln (1995) and Oswald (1997). Subjectve questons have also been used n calbratng utlty functons of ncome, followng Van Praag (1968). In psychology, there s now a large lterature on subjectve welfare and ts covarates (for a survey see Dener et al., 1999). Varous types of subjectve data on power have been used n the socal scences. In poltcal scence, subjectve data have been used to study power conscousness (Aberbach, 2 For further dscusson see Easterln (1995), Oswald (1997) and Dener et al. (1999). 3

4 1977) and n research on poltcal effcacy (for example, Stewart et al, 1992) and poltcal freedom (Gbson, 1993). In socology and socal psychology, subjectve questons on powerlessness have been used to study alenaton (Roberts, 1987) and paranoa (Mrowsky and Ross, 1983). There has also been research on related aspects of self-percepton such as work n socology on subjectve class-dentfcaton (Davs and Robnson, 1988). However, the relatonshp between power and welfare has receved lttle attenton n the lterature. In one of the few exceptons, Ross and Mrowsky (1992) fnd evdence for the U.S. that wage employment, hgher earnngs and hgher educaton are all assocated postvely wth a greater (subjectvely assessed) sense of control over one s lfe suggestve of greater empowerment. Usng subjectve welfare data for Swtzerland, Frey and Stutzer (2) fnd that the ablty of people to nfluence outcomes of the local poltcal process rases ther subjectve welfare. We know of no attempts to examne the jont soco-economc determnants of power and welfare, ncludng the role played by ncomes, both n levels and ther dstrbuton. Contemporary Russa s of nterest as a settng for ths enqury for two reasons. Frstly, there s clearly nequalty n both power and economc welfare. Despte the fact that Russans have enjoyed new-found poltcal freedoms snce the late 198s, t s unlkely that empowerment has clearly not yet been wdely dffused; ths varance n perceved power offers the hope of better understandng ts etology. The hgh degree of ncome nequalty that emerged n Russa n the 199s also suggests that t s an nterestng settng for examnng ncome effects. Secondly, there are survey data for Russa that offer an opportunty for examnng these ssues. The survey we wll use asked all adult respondents to place themselves on Cantl (1965) 3 On the potental of subjectve data for addressng the longstandng problem of dentfyng welfare from observed behavor see van Praag (1968), Kapteyn (1994) and Pradhan and Ravallon (2). 4

5 ladders for both power and welfare. For assessng perceved power, the survey asked: Please magne a nne-step ladder, where on the bottom, the frst step, stand people who are completely wthout rghts, and on the hghest step, the nnth, stand those who have a lot of power. On whch step are you? We refer to ths the Power Ladder Queston (PLQ). The correspondng welfare queston s: Please magne a nne-step ladder where on the bottom, the frst step, stand the poorest people, and on the hghest step, the nnth, stand the rch. On whch step are you today? We call ths the Welfare Ladder Queston (WLQ). 4 Both questons leave t up to the ndvdual to decde what t means to be wthout rghts, to have a lot of power, or to be poor versus rch. In past analyss of the WLQ (n earler rounds of the same survey), Ravallon and Lokshn (22) found that the answers could not be nterpreted as solely reflectng real household ncome (household ncome deflated for dfferences n the cost-of-lvng and n household sze and composton). There was evdence of sgnfcant ndvdual ncome (and other) effects at gven household characterstcs, and strong effects of educaton, employment, health status, area of resdence and other characterstcs, ndependently of ncome. The WLQ s clearly capturng a broader concept of welfare. In addton to askng ndvdual perceptons of power and welfare, the surveys collected a standard set of objectve soco-economc characterstcs that are potental covarates of both power and welfare. Ths allows us to deal wth an obvous lmtaton of past work on subjectve power, namely that these data are only collected wthn a relatvely lght survey nstrument. 5 A further advantage of our data s that they are longtudnal, so we can look at how perceptons of 4 See Ravallon and Lokshn (22) for further dscusson of ths queston and alternatves n the lterature as means of dentfyng ndvdual welfare functons. 5 For example, Gbson (1999) compares perceptons of poltcal freedom n the Sovet Unon n 199 across dentfed covarates and argues that perceptons of (poltcal) represson have evenly 5

6 power and welfare change over tme. By choosng the tme perod we also expect to observe sgnfcant welfare gans, snce the 1998 survey was done soon after the 1998 fnancal crss, whch mpacted on household welfare (Lokshn and Ravallon, 2). Armed wth these data, we address the followng questons: How much do perceptons of current power and welfare agree? How much of ths s accountable to observable covarates? How much does ncome nequalty attenuate aggregate power and welfare? How mportant s nequalty wthn the household versus between households? How do the answers to these questons dffer between men and women? The followng secton offers some theoretcal arguments wth bearng on how closely one mght expect power and welfare to be assocated across ndvduals. We then dscuss our approach to modelng the data and present our results. The fnal secton concludes. 2. Personal power and welfare n theory We assume that a person s perceved power depends n part on hs effort to partcpate n certan nsttutons. These may be explctly poltcal nsttutons or neghborhood or workrelated nsttutons. The effort to partcpate s costly to the ndvdual, though there are also drect welfare benefts. The characterstcs of a person (educaton, age, locaton and so on) can nfluence both the costs and benefts of acqurng power. We ntally gnore households and treat each ndvdual as an sland, though we relax ths later. The power acqured by a person makng effort e wth characterstcs x s p = π ( e, x), dffused throughout socety (p.959). Yet Gbson s data set contan rather few covarates, and t s unclear to what extent hs concluson derves from ths lmtaton of hs data. 6

7 where the functon π s strctly ncreasng and at least weakly concave n effort. The cost s c ( e, x), whch s assumed to be strctly ncreasng and at least weakly convex n effort. (These curvature assumptons can be relaxed somewhat wthout changng the man results.) Power s valued postvely. Ths may be because t drectly rases personal consumpton opportuntes, or t may be valued ndependently of consumpton. Let y denote exogenous ncome, meanng that component of ncome that s unaffected by power. We use the term net ncome to refer to exogenous ncome net of the cost of acqurng power. Utlty s a strctly ncreasng functon of both net ncome and power, namely u[ y c( e, x), π ( e, x)]. A specal case s when π ( e, x) s the ncome gan due to power, whch s not valued ndependently of consumpton, so utlty s smply an ncreasng concave functon of y c( e, x) + π ( e, x). The functon u s assumed to be strctly quas-concave n ts two arguments. We also assume that there are dmnshng returns to consumpton, non-ncreasng returns to power and that hgher power (ncome) does not decrease the margnal utlty of ncome (power).e., u (though these assumptons too can be weakened somewhat wthout changng the man results). The chosen level of effort, e ( y, x), maxmzes u[ y c( e, x), π ( e, x)], whch requres that yp u y c e = u π (usng subscrpts to denote partal dervatves). It s readly verfed that: p e 1 > e y = ( u yyce uypπ e ) J (1) e x = [( u π u c ) c + u c + ( u c u π ) π u π ] J (2) yp x yy x e y ex yp x pp x e p ex 1 where J u 2 yyce 2u yp π c u c e e y ee + u π p ee + u pp π 2 e < The derved level of power at optmal effort s: 7

8 p( y, x) = π [ e( y, x), x] (3) where py = π eey > and px = π eex + π x. The derved level of utlty at optmal effort s: v( y, x) = u[ y c( e( y, x), x), p( y, x)] (4) where v y = u y > and vx = u ycx + u pπ x. Whle t s reasonable to assume that p ( y, x) s the contnuous varable that people have n mnd when they answer the PLQ, there can be no presumpton that answers to the WLQ are based solely on utlty. The maxmand for choce need not concde wth perceptons of poverty. Nor can we assume that answers to the WLQ are based on y or y c( e, x) ; people may thnk that ths s too narrow a bass for dstngushng poor from rch. 6 Instead, we assume that the WLQ s based on a more general defnton of welfare represented by: w = w[ u( y c( e, x), π ( e, x)), x] (5) The functon w s strctly ncreasng n utlty, but can also vary wth x ndependently of utlty. Notce that whle maxmzng w yelds exactly the same effort functon (such that u y c e = u π ), p e t could clearly behave n very dfferent ways to v ( y, x) or y, gven heterogenety n x. 7 So power mght be correlated hghly wth ncome or utlty but not welfare, as gven by (5). Snce both power and utlty are welfare ncreasng n ncome n the above model, we can expect a strong assocaton between power and welfare amongst otherwse dentcal ndvduals, through the jont effect of ncome dfferences. Decreasng returns to effort n augmentng power wll tend to yeld a concave relatonshp between power and ndvdual ncome. Aganst ths 6 Ths echoes Sen s (1987) well-known crtque of both utlty and ncome nterpretatons of the standard of lvng. 7 Ths s formally smlar to the well-known problem of dentfyng utlty from demand behavor, as dscussed n (nter ala) Pollak (1991) and Brownng (1993). 8

9 effect, the ncome effect on effort can be ether ncreasng or decreasng n ncome. For power to be concave n ncome we requre that the ncome effect on effort s not too convex; specfcally 2 yy < ee y e that e π e / π ( > ). Then hgher ncome nequalty (n the usual sense of mean preservng spreads) wll tend to reduce aggregate power as well as welfare (gven our standard assumptons of dmnshng margnal utlty of ncome). One can conjecture that there may also be effects of nequalty on the dstrbuton of ndvdual power or welfare, through the vector x. For example, hghly unequal socetes may come wth greater represson of the poltcal freedoms of the poor, rasng the cost of poltcal effort and reducng ts benefts. The extent of congruence s less clear for non-ncome characterstcs. Two extreme cases wll serve to llustrate the range of theoretcal possbltes. Case 1: Power and welfare respond dentcally to dfferences n non-ncome characterstcs. We gve two examples for ths case. In the frst and smplest example, power has no ntrnsc value and so t only rases welfare through ts effect on consumpton, whch s all the matters to welfare (.e., w = u ). In addton, suppose that: () the power functon s strctly concave n effort and addtvely separable between effort and characterstcs ( π = ); ex () the cost of effort depends solely on the amount of effort ( c = ). Then t s mmedate that e x = and that px = π x whle v x = u y π x. The monetary value of the welfare effect of a change n x s smply gven by ts effect on power. To gve a second example of Case 1, suppose nstead that: () welfare s utlty, whch s addtvely separable between consumpton and power x 9

10 ( u = ) and lnear n power ( u = ); yp pp () the cost and power functons are also addtvely separable ( c π = ); () both power and ts cost are lnear n effort ( π = and c = ). ee ee ex = ex Then t s mmedate from (2) that e / x = cx ce. Recallng that px π eex + π x =, t follows that p = x = uycx + π x vx (usng the fact that optmal effort requres that u yce u pπ e = ). So n ths specal case, power and welfare commove perfectly wth dfferences n ndvdual characterstcs. Case 2: Power and welfare respond oppostely to non-ncome characterstcs. As already noted, there may well be welfare effects of dfferences n x at gven y c( e, x) and π ( e, x). However, even wthout these dfferences, one can readly construct specal cases n whch the effects go n opposte drectons. Suppose that: () the cost of poltcal partcpaton depends solely on one s effort,.e., c =, and () there s a sngle non-ncome characterstc and more of ths characterstc enhances power at gven effort ( π > ) and does not decrease welfare at gven utlty. x So hgher x entals hgher welfare. The effect on power s ambguous, however. The key unknown s how the non-ncome characterstc nteracts wth effort. Does hgher x rase or lower the mpact of dfferences n effort on power? (Or, equvalently, does greater effort magnfy or attenuate the power dfferences assocated wth dfferences n x?) It s readly verfed that the necessary and suffcent condton for power to also be ncreasng n x s that: π x[ J π e( u ypce u ppπ e)] π ex > < (6) π u e p If hgher x enhances the power returns to effort ( π > ) then clearly power and welfare wll 1 ex x

11 respond the same way to dfferences n x. However, wth a negatve nteracton effect ( π < ) t s possble for power to be decreasng n x. Ths happens when hgher x so reduces the margnal mpact of extra effort on power that the optmal level of effort falls enough to ental lower realzed power. Then, at gven ncome, welfare and power wll be negatvely correlated. The above dscusson has looked at ndvduals n solaton. Wll ntroducng households nto the pcture strengthen or weaken the assocaton between personal power and welfare? If one assumes that both power and welfare are at least partally shared wthn households then the effect on the correlaton between power and welfare across ndvduals wll depend on the sortng process n household formaton. If people wth characterstcs that yeld low (hgh) power tend to match wth people whose characterstcs yeld low (hgh) welfare then household formaton wll strengthen the correlaton across ndvduals. On the other hand, f gans from trade are the domnant factor, such that ntal nequaltes n power between partners are at least partly offset by opposng welfare nequaltes, then the correlaton wll be weakened. However, the assumpton that power and welfare are shared s not obvously plausble. There are two ponts to note. Frstly, whle ncome transfers can allow sharng of economc welfare, the one redstrbutve nstrument wll not be suffcent to average out the dfferences n both power and welfare when people whose characterstcs yeld low power and hgh welfare pror to household formaton par up wth those holdng hgh power but low welfare. Another nstrument would then be needed. Sharng knowledge relevant to power could serve ths role. Secondly, t may not be n the nterests of the person wth greater power to share that power wthn the household. Sharng knowledge relevant to power may swtch the ntrahousehold allocaton of resources aganst the ndvdual s nterests. Analogously to the model of ex 11

12 Basu et al. (22) on whether lteracy s shared, f preferences dffer suffcently between the person wth power and the person wthout t then power sharng wll not occur. The above dscusson has suggested a number of reasons why there mght be only a weak assocaton between self-rated power and welfare. An mportant source of ambguty s lkely to le n how power and welfare are jontly affected by non-ncome characterstcs, and also n how these characterstcs come to be assocated through household formaton. We wll next see what our data for Russa suggest about the emprcal assocaton between power and welfare. 3. Evdence for Russa We use the November-December 2 and October 1998 rounds of the Russan Longtudnal Montorng Survey (RLMS) obtanable from the RLMS web ste: home.html. Ths covered a sample (n 2) of 38 households (83 adults; 67 wth data for 1998). All adults n the sampled households were asked the PLQ and WLQ gven n the ntroducton. In both cases, we decded to condense the hghest 7 th, 8 th, and 9 th rungs nto one, because only a small number of respondents (less than one percent n both cases) put themselves on rungs 8 and 9. So, we treat the data as two seven-rung Cantrl ladders. Table 1 summarzes responses to the WLQ and PLQ from the 2 survey. The row total gves the number of respondents n each power rung, whle the column totals are for welfare. A standard measure of assocaton for contngency tables s Cramer s V, whch tests the null hypothess of no assocaton between the row varable and the column varable n the table (see, for example, Agrest, 1984). Cramer s V takes a value between (no relatonshp) and 1 (perfect correlaton). The value for the sample as a whole mpled by Table 1 s.336 (wth a 12

13 bootstrapped standard error of.6). For males, t s.331 (standard error of.9) whle t s.343 (standard error of.9) for females. So we fnd a sgnfcant postve assocaton between power ranks and welfare ranks. However, the matchng between the two s clearly far from perfect. For example, of the 24 ndvduals who put themselves on the hghest welfare rung, less than a half answered that they have the most power. For the poorest group 24% of respondents ndcated that they dd not see themselves as beng the least powerful. On nspectng Table 1, t s evdent that the greater source of msmatchng s n the upper off-dagonal than the lower one,.e., there are many people who do not thnk of themselves as poor but who feel relatvely powerless. Ths pattern holds for both men and women. In Table 2 we use the panel nature of the data to compare changes n power ranks wth changes n welfare ranks from 1998 to 2. (There were a few ndvduals whose welfare and/or power perceptons changed by more than four rungs between 2 and We combne these nto the top (+4) and the bottom (-4) categores.) Amongst all surveyed adults, 42.5% regstered a hgher ladder rung for ther power n 2 than 1998, whle 45.3% dd so for ther welfare. On the other hand, 28.4% regstered a lower power rung, and 25.5% showed a lower welfare rung. On assocatng the changes, we fnd that amongst those who felt that ther power rose by a rung or more, 63.5% also regstered a hgher rung of the welfare ladder, whle only 14.1% felt that ther welfare had fallen. For those who regstered a hgher welfare rung, 59.6% also sad that ther power was at least one rung hgher, whle only 16.3% sad that t had fallen a rung or more. There s a sgnfcant correlaton overall; the Cramer s V for the sample as a whole s.223 (standard error of.6), whle t s.28 (.9) and.239 (.9) for males and females respectvely. The fact that we stll fnd a sgnfcant assocaton n the changes over tme tells us 13

14 that the correlaton n the levels evdent n Table 1 s not entrely due to a common tme-nvarant ndvdual effect, such as due to the respondent s personalty. 4. Specfcaton of a model of subjectve power and welfare In prncple, one can dentfy a causal effect of perceved power on perceved welfare f there s a vald nstrumental varable (IV) that s correlated wth welfare but not correlated wth power gven welfare and other observed covarates. However, we do not beleve a vald IV exsts for ths problem. Any varable that one can magne as an nfluence on power would surely also be a potental nfluence on welfare ndependently of power. For example, where one lves wll no doubt nfluence one s perceved welfare, but t could also nfluence power at gven welfare, such as when areas dffer n how much power over decson makng s decentralzed. Instead we ask whether welfare and power share common covarates. Is there any varable that nfluences one but not the other, or has opposng effects? How much of the emprcal assocaton found n the last secton s attrbutable to dfferences n the ways that these varables respond to observed covarates, versus other (latent) factors? We buld the analyss on explct assumptons about the underlyng contnuous varables determnng where one sees oneself on the ladder from "poor" to "rch" or from least powerful to most powerful. The contnuous varables for welfare and power (w and p) are assumed to w h p h be determned n part by functons f ( y, y ) and f ( y, y ) of ndvdual ncome ( y ) and household per capta ( h y ). We also allow for a vector of observable varables (x) that affect welfare and power at gven ncomes. In addton, we allow for unobservable varables, whch we wll lump nto ndependent and dentcally normally dstrbuted error terms w ε and p ε. Our 14

15 emprcal models correspondng to equatons (3) and (5) are then: p p h p p = f ( y, y ) + x β + ε (7.1) w w h w w = f ( y, y ) + x β + ε (7.2) w h p h The mpacts of nequalty depend on the curvature of the functons f ( y, y ) and f ( y, y ) ; f the functons are strctly concave then nequalty (n the sense of a mean-preservng spread) lowers mean power or welfare (secton 2). In our estmaton we assume that the functons w h p h f ( y, y ) and f ( y, y ) are second degree polynomals: 8 f f p w ( y, y ( y, y h h p p 2 p h p h 2 1 y + α2 ( y ) + β1 y β2 ( y ) ) = α + (8.1) w w 2 w h w h 2 1 y + α2 ( y) + β1 y β2 ( y ) ) = α + (8.2) Assumng level comparablty of the ladder across persons, someone wth w < c 1 (say) wll respond that she s on the frst rung of the economc ladder, whle someone for whom c 1 < w < c 2 wll be on the second, and so on up to the hghest rung. Smlarly, someone wth p < a 1 wll respond that he s on the frst rung of the power ladder, someone wth a 1 < p < a 2 wll respond that he s on the second rung, etc. Gven our assumpton that the error terms are normally dstrbuted, we can use an ordered probt to model the responses. The effect of hgher ndvdual ncome on w and p can be decomposed nto a drect effect (holdng household ncome constant) and an ndrect effect (va the change n household ncome). In a strct pollng model of household decson makng, the drect effect would be absent. Under our functonal form assumptons, the effect of a gan n ndvdual ncome holdng 8 We tested an alternatve functonal form that ncluded nteractons between the ndvdual and household ncomes. The nteracton term coeffcents were nsgnfcantly dfferent from zero n our estmatons and we decded to proceed wth the smpler specfcaton. 15

16 h other ncomes n the household ( y n y ) constant s gven by: p y = [ p p p p α 1 + 2α 2 y] + [ β1 + 2β 2 y h ]/ n (9.1) w y = w w w w [ α 1 + 2α2 y] + [ β1 + 2β2 y h ]/ n (9.2) To nterpret these dervatves, notce that when ndvdual ncome ncreases (decreases) t n turn ncreases (decreases) total household ncome. Thus the ndvdual ncome effect comprses an effect arsng from the change n ndvdual ncome keepng the household ncome constant (the frst of the rght-hand-sde terms n (9.1) and (9.2)), plus the effect va the change n household ncome (second of the rght-hand-sde terms n (9.1) and (9.2)). 5. Covarates of power and welfare The ncome varable we use s total monthly dsposable ncome, whch ncludes wages and salares, socal securty, prvate transfers, and mputed ncome n-knd and from home producton. We ntally assume that all ncome s exogenous to power, though we relax ths later. To convert to real values we use regon specfc deflators based on Popkn et al., (1995). We also nclude geographc dummy varables that can help pck up errors n the deflators due to any omtted cost-of-lvng dfferences. The RLMS also ncludes household and ndvdual characterstcs of the respondents, whch we use to control for heterogenety at gven ncomes. The vector of explanatory varables ncludes ndvdual characterstcs such as respondents age, age squared, dummy varables for educaton achevements and martal status. The demographc characterstcs nclude the household sze and sze squared, and the shares of chldren, adult women and pensoners n the household. 16

17 We also examne the effect of employment status. A number of papers have found that unemployment lowers subjectve welfare, even at gven (current) ncomes (Clark and Oswald, 1994; Oswald, 1997; Blanchflower and Oswald, 1997; Wnkelmann and Wnkelmann, 1998). There s less evdence on the effect on power and arguments have been made that pont n both drectons. The Marxan lterature has vewed wage labor as alenatng. Aganst ths vew, t can be argued that (ceters parbus) an unemployed person would feel less control over the thngs that matter to hs welfare than someone wth a job. Ross and Mrowsky (1992) fnd evdence of postve effects on perceved power of employment n the U.S. We also nclude a dummy varable for whether the respondent s Russan or not (85% of the sample s Russan). Survey evdence for Western Europe and North Amerca suggest that mnortes often face dscrmnaton and socal excluson that attenuates perceved welfare and power. For example, Ross and Mrowsky (1992) fnd that mnorty groups n the U.S. tend to have less sense of control over ther lves. It s not clear, however, that the Russan settng would be smlar n ths respect, gven that the mnorty groups n Russa typcally dd not stem from a hstory of mgraton (voluntary or otherwse) to deal wth labor shortages. In a sample of 1,5 Sovet adults n 199, Gbson (1993) fnds that perceptons of governmental represson and self-censorshp are uncorrelated wth mnorty status (ndeed, the reported (smple) correlaton coeffcents are less than.5 n both cases). Gbson s comparsons wth smlar data for the U.S. ndcate larger dfferences n perceved constrants on poltcal freedom between whtes and Afrcan-Amercans than found amongst Sovet ctzens n 199s. (Gbson s results suggest that Afrcan-Amercans see themselves as absolutely less free than Sovet ctzens.) We also estmate a model n whch we add atttudnal varables related to self-reported 17

18 health status and expectatons about the future, followng earler work on subjectve welfare n Russa (Ravallon and Lokshn, 22). There are obvous concerns about the endogenety of these varables. However, t wll stll be of nterest to study ther correlatons wth subjectve power and welfare, and how ther ncluson n the regressons affects other coeffcents. Summary statstcs on the set of covarates we wll use are gven n Table Results For the total sample, and for the samples of males and females separately, Table 4 presents the results of the ordered probts for welfare and power (ths s the basc specfcaton, wthout the atttudnal varables to be ncluded later). Before we dscuss the detaled results n Table 4, t s of nterest to test the overall ft, by comparng the actual dstrbutons of respondents across the welfare and power ladders wth the models predcted dstrbutons. The results are gven n Table 5. (We explan the smulated dstrbutons n Table 5 below.) The ft s clearly qute good. Indeed, for power, the actual and predcted dstrbutons across the ladder rungs are dentcal when rounded off to the nearest percentage pont. Ths holds for males and females separately, as well as the full sample. The ft s equally good for welfare on the full sample, though when we splt by gender a few cases emerge n whch a dfference n the dstrbuton across ladder rungs perssts when rounded off to the nearest percentage pont. 6.1 Income effects Focusng frst on results for the total sample n Table 4, we see that n all cases the coeffcents on the ncome varables ndcate a concave relatonshp (as mpled by the sgnfcant negatve coeffcent on the squared term). Fgure 1 shows how the emprcal functons w h f ( y, y ) and f ( y, y ) vary wth household ncome evaluated at each data pont for p h 18

19 ndvdual ncome. On the graph we supermpose the non-parametrcally estmated densty of household per capta ncome (rght vertcal axes) on the scatter plot, whle on the vertcal (left) axes we graph the value of the functon calculated for every level of household per capta ncome (horzontal axs) and ndvdual ncome (the scatter ponts). We fnd a postve relatonshp wth household ncome over the bulk of the data, and t tends to be steeper for welfare than power. Ths also holds for ndvdual ncome (Fgure 2). We fnd a strong ndcaton for both power and welfare that the latent contnuous varable s concave n ncome. Thus hgher nequalty (n the usual sense of mean-preservng spreads) reduces both aggregate power and aggregate welfare. To measure the contrbuton of nequalty we smulate the effect on power and welfare of equalzng ncomes. We do ths n two ways. Frst we equalze ncomes wthn households, so that actual ndvdual ncomes are replaced by the ndvdual s own household ncome per capta; we then calculate the predcted dstrbutons across welfare and power ladders. Secondly, we repeat ths for full equalzaton of ncome per person across households. Table 5 gves the results for these smulatons. Even wth complete equalzaton of ncomes there s only a small drop n the proporton of respondents who rate themselves as beng amongst the least powerful; the proportonate mpact on the number who rate themselves as beng on the poorest rung s only slghtly greater than for power. 9 Partal equalzaton wthn famles naturally has less mpact, though a notceably greater mpact on the perceved power of women than men. (For women, modal power shfts up one rung wth ether partal or complete 9 Notce that ncome equalzaton does not reduce the number n the most powerful cell n all cases; ths s because the quadratc functon reaches ts maxmum pror to the maxmum ncome; however, there are very few observatons above the turnng pont. 19

20 ncome equalzaton; but the quanttatve effect s small.) To help understand the ndvdual ncome effect we do the decompostons n equaton (9) at the mean values of ndvdual ncome, total household per capta ncome, and household sze for the total sample and for the samples of males and females. The results are gven n Table 6. For the whole sample, 81% of the ndvdual effect on perceved power s drect whle the rest s transmtted va the gan n household ncome. For welfare the effect accounts for 73% of the ncome effect on welfare. The share that s ndrect (va household ncome) s hgher for women than men. However, the smple poolng model s clearly rejected for both men and women. 6.2 Other covarates A number of sgnfcant covarates are found at gven ncomes. Male respondents tend to have hgher perceved power, but there s no such dfference n perceved welfare by gender. Younger respondents feel that they have less power (the maxmum perceved power s attaned at about 75 years of age) and have lower subjectve welfare (the maxmum s at the age of 65). Lvng n larger households ncreases subjectve perceptons of both power and welfare. The presence of chldren -6 years of age n the household ncreases welfare and power. Non-Russans n the sample tend to have hgher perceved power and welfare; the effect s stronger for power than welfare, and stronger for males than females. Ths s not consstent wth the arguments and evdence for Western Europe and North Amerca, pontng to dscrmnaton and socal excluson amongst mnortes. As we have noted, the Russan settng s possbly rather dfferent n ths respect. It remans puzzlng, however, that Russans see themselves as less powerful and wth lower welfare than others. Possbly we are pckng up a personalty or cultural trat wth lttle relatonshp to objectve crcumstances. 2

21 We fnd a strong effect of educaton on power and welfare. Indvduals wth unversty degrees and wth techncal or vocatonal degrees have sgnfcantly hgher power and welfare n comparson to respondents wth only a hgh school dploma. The effect of educaton s almost twce as hgh for power than for welfare. Beng unemployed lowers both power and welfare, though the effect of employment status s larger n the case of welfare. Coeffcents on the regonal dummes ndcate sgnfcant geographcal effects on both power and welfare. Geographc proxmty to the seat of poltcal power clearly matters. Respondents from almost all regons feel less powerful than the respondents lvng n Moscow and Sant Petersburg, but the regonal dfferences are generally less pronounced (and less sgnfcant statstcally) for welfare. Comparng the results for males and females reveals that whle male welfare and power peaks around the age of 6, female power and welfare are ncreasng functons of age over the whole range of the data. We observe a stronger effect of educaton on the perceved power of males than females, but ths dfference dsappears for welfare. Beng dvorced has a stronger (negatve) effect on both power and welfare for women, though the effects are not statstcally sgnfcant. Smlarly to the results for the total sample, beng unemployed decreases power and welfare for both men and women. However, the effect of unemployment on power s stronger for women than men, whle the welfare effect s smlar. Lvng n larger households has a postve and sgnfcant mpact on the subjectve power and welfare of females, but for males ths effect s not sgnfcant. The presence of chldren age to 6 years of age ncreases the perceved welfare of women, but does not have any sgnfcant effect on men s welfare. Havng more women n 21

22 the household ncreases perceved power and welfare of men (though the effects cannot be consdered statstcally sgnfcant), but has no effect for women. Whle we have noted a number of dfferences, broadly speakng our results suggest that the factors that determne subjectve perceptons of economc welfare have smlar effects on perceptons of power. Fgure 3 shows the plots of the predcted levels of welfare and power. The two are strongly correlated for the total sample as well as for the samples of males and females separately. The correlaton between these two ndcators s stronger for females; the correlaton coeffcent for female predcted perceptons s.94 (wth a standard error of.13) as compared to.875 (wth the standard error of.33) for males. 6.3 Alternatve specfcatons One possble concern about the above results s that ncome may be exogenous n the regressons for power. In partcular, t mght be argued that hgher personal power has a postve effect on ncome thus basng our results. There s no obvous dentfcaton strategy; any potental nstrument for ndvdual ncome would be a potental covarate of welfare or power. However, we do not need to dentfy the structural relatonshp for the present purposes. To test whether our conclusons would hold under a dfferent specfcaton we smply re-estmate our model excludng the respondent s own ncome. Thus we drop the ndvdual s own ncome and replace household ncome wth ts value net of the ndvdual s ncome. Ths assumes that the endogenety problem s ndvdual-specfc,.e., that t does not spllover to the ncomes of other household members. The results are n Table 7. The man fndngs descrbed above are qute robust to ths change. One notable excepton s that the squared term on ncome s no longer sgnfcant for 22

23 power; we cannot reject the null that the ncome effect s lnear for power. Agan we fnd that power and welfare perceptons are strongly correlated n the total sample for whch the correlaton coeffcent between predcted values s.931 (wth a standard error of.12); n the samples of males the correlaton s.829 (.29) and for females t s.944 (.15). Table 8 gves the extended specfcaton n whch we add the atttudnal varables on health and expectatons for the future to the basc model n Table 4. For the WLQ the results echo earler fndngs (Ravallon and Lokshn, 22), namely that perceved ll-health reduces subjectve welfare as does the expectaton that thngs wll get worse n the future. When we use these as addtonal regressors for PLQ we agan fnd consderable agreement n how they mpact on power and welfare. Ill-health attenuates perceved power as do expectatons that thngs wll get worse n the future. Other coeffcents are reasonably robust wth one notable excepton: the sgnfcant postve effect of beng male on perceved power vanshes n the extended model; ths effect s attrbutable to the atttudnal dfference. Agan we fnd hgh correlatons between the predcted values of power and welfare; for the full sample the correlaton coeffcent s.943 (standard error of.1), whle t s.96 (.22) for males and.95 (.11) for females. We explored further why the gender effect on power vanshes when we control for the atttudnal dfferences. On only addng the expectatons varables the gender effect on power remans. On only addng the health varables the gender dfference n power becomes nsgnfcant. So the gender dfference n perceved power s largely accountable to the fact that women tend to see themselves as less healthy than men (Table 3). 7. Conclusons If empowerment of specfc groups n socety s to be seen as a dstnct polcy objectve 23

24 to reducng poverty or nequalty n terms of economc welfare then one should be able to establsh that power s allocated dfferently. But how can we assess how power s assgned to people? We have tred to see what can be learnt from self-perceptons of power as reported n an unusual data set for Russa, whch combned subjectve data on power and welfare wth the standard objectve data collected n soco-economc surveys. We fnd that the self-assessed power of Russan adults s sgnfcantly correlated wth ther economc welfare, both as they perceve t and by conventonal objectve measures. It could hardly be deemed a very strong correlaton. Consder those people on the lowest two rungs of the subjectve welfare ladder (about the poorest quarter of the sample) and those on the lowest rung of the power ladder (also about one quarter). We fnd that only about half those who are poor by ths defnton see themselves as powerless. The man reason why the correlaton s not stronger s that many people (both men and women) who do not see themselves as poor feel that they have lttle power. We fnd that 42% of the sample placed themselves on a lower rung of the power ladder than of the welfare ladder; by contrast, less than half as many (18%) put themselves on a hgher power rung than ther welfare rung. The scope for empowerment n Russa s clearly not confned to the poor, at least as they perceve t. When we look at the changes over tme, we also fnd a statstcally sgnfcant correlaton between power and welfare. Perceved welfare gans (losses) are more lkely to come wth gans (losses) n perceved power. For only 13% of respondents dd perceved welfare and perceved power move n the opposte drecton between 1998 and 2. However, t remans that 4% of those who felt that ther welfare had rsen by a rung or more dd not feel that they had reached a hgher rung on the power ladder. And a slghtly smaller proporton of those who felt that ther 24

25 power had rsen by a rung or more dd not feel that they had rsen on the welfare ladder. The seemngly weak (though stll sgnfcant) uncondtonal assocaton that we fnd between power and welfare n both levels and changes mght be taken to suggest that there s ample scope for an empowerment polcy agenda that s qualtatvely dfferent to that for rasng economc welfare. However, ths s not so clear when we turn to modelng the power and welfare rankngs as functons of observed (objectve) covarates. Indeed, we are struck by the smlarty n observable covarates. Granted, we do fnd some dfferences. For example, gender s more mportant to power that t s to welfare, wth women feelng that they have less power ceters parbus; ths effect s largely attrbutable to dfferences n perceved health; controllng for ths dfference (and other covarates) there s no sgnfcant gender effect on perceved power. To gve another example, unemployment reduces power more that t reduces welfare (though t s a strong determnant of both). Nonetheless, lookng at the results as a whole, we are drawn to conclude that there s strong agreement n how perceptons of power and welfare react to dfferences n ndvdual and household characterstcs. The predcted values show a very hgh correlaton (around.9, and even hgher for men and women separately). The much weaker uncondtonal correlaton between perceved power and perceved welfare s drven by dosyncratc factors that are not readly accountable n terms of observable characterstcs n our survey. The fact that the characterstcs that are good for rasng ndvdual economc welfare are also good for empowerment (albet wth some subtle dfferences) suggests that any scope for dstnct polces largely rests wth the dosyncratc dfferences that we have not been able to account for. It remans unclear to what extent those dfferences are amenable to polcy. 25

26 Amongst the covarates we have focused on, the mportance of ncome s notable snce t s the varable that many economc events and polces act through. Hgher ncome tends to come wth greater perceved power as well as hgher welfare. The bulk of the ndvdual ncome effect s va own ncome rather than through household ncome, mplyng a clear rejecton of the smple poolng model (though less so for women than men). There are dmnshng returns to ncome for both power and welfare (though for power, ths s not robust to specfcaton changes). Consstently wth seemngly plausble theoretcal assumptons, the curvature of the relatonshp wth ncome ndcates that ncome nequalty attenuates both aggregate power and welfare, though the effect s not quanttatvely large. Whle our results suggest that ncome dfferences matter smlarly to both power and welfare, that does not justfy a narrow focus on ncomes. Echong past work n the lterature, we fnd many sgnfcant covarates of welfare at gven ncomes, suggestng that peoples perceptons of how poor they are affected by many other thngs than ther ncomes, ether ndvdually or at the household level. What s strkng about our fndngs s that these same thngs also determne ther perceptons of power. 26

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30 Cramer s V=.336 Power rank Table 1: Contngency table of welfare and power ranks, Russa 2 1 (Poorest) (a) Full sample Welfare rank (Rchest) Total 1 (Least powerful) (Most powerful) Cramer s V=.331 Power rank Total (Poorest) (b) Males only Welfare rank (Rchest) Total 1 (Least powerful) (Most powerful) Total