What Determines Individual Preferences over Reform? Microeconomic Evidence from Russia

Abstract

This paper provides empirical evidence on the determinants of individual reform preferences in Russia after the August 1998 crisis. We analyze the response pattern to survey questions about the individual's support of returning to socialism and stopping market reforms in a bivariate probit framework. Two possible explanations for the observed preferences are considered. First, personal attitudes toward reform are affected by the individuals' economic gains or losses during transition. Second, as established by research in sociology, some societal groups are more flexible than others in adapting to changes in their environment. The empirical results, which focus on the effect of age, education, labor market status, income levels and income changes on the likelihood of opposing reform, give support to both hypotheses. Interestingly, we also find a strong regional variation in reform attitudes. Controlling for individual characteristics, we establish that people who live in high-arrears regions are more likely to oppose the reform process. Furthermore, the regional income level, ethnic composition, oil production and crime rate are significantly related to the market reform orientation of the regions' residents.