Credit and income mobility in Russia

Abstract

This paper investigates the microeconomic drivers of short-term income mobility in Russia over the period 1994–2018, focusing on the role of access to credit in triggering household income growth. Controlling for a large set of household-level characteristics and accounting for endogeneity, we provide robust evidence on the positive and significant impact of credit on income growth. We also find that the pro-mobility effect of access to credit is heterogeneous both over time and across household characteristics. Our empirical evidence corroborates the idea that the beneficial impact of credit on income mobility mainly occurs through channels related to the labour market, particularly an increase in labour supply at the intensive margin in the short run and at both the extensive and intensive margins in the longer run.