in earnings explains only 70 percent of the decline in cash incomes, while falling government transfers in real terms and declines in other income are also quite important (Figure 20). For the non‐vulnerable, government transfers and other types of income actually grew during the crisis times. The positive dynamic of other types of income is mainly driven by top income deciles that enjoyed higher dividends during the crisis due to higher interest rates.

_Figure 20: Decomposition of real cash income change during the crisis (2014‐2016) and the recovery (2017)_ <!-- Start of picture text --> 30<br>20<br>10<br>0<br>-10<br>-20 Other income<br>-30<br>Transfers<br>-40<br>Earnings<br>2014-2016 2016-2017<br>Average Vulnerable Non-vulnerable Average Vulnerable Non-vulnerable<br><!-- End of picture text --> Note: Absolute income change is measured in real 2014 roubles per capita. The income change could be explained by both the income dynamics for the vulnerable and non‐vulnerable groups and by the change in the composition of those groups from one period to the next – during the crisis poverty risks and the vulnerable group expanded, and it could be the influencing factor for the change in income structure of the vulnerable population. Source: Authors’ calculations based on quarterly HBS.

Government transfers did not help vulnerable households to smooth declining incomes during the crisis; moreover, the decline in transfers exacerbated the decline in earnings and other types of income. During the recovery, transfers also did not play a positive role for the vulnerable – the restoration of incomes was predominantly led by earnings and, to a much smaller extent, by other types of income. For the non‐ vulnerable, on the contrary, other income sources were declining in 2017, reflecting lower interest rates in the aftermath of the crisis.

The reason why government transfers were not able to help smooth declining incomes among vulnerable households is due to the fact that the design of government transfers is mainly age‐based, with the two largest programs being age pensions and benefits for children. While these programs contribute significantly to poverty and inequality reduction (Bornukova et al. 2017), they are not designed to react to the crisis efficiently, as they are not needs‐based. Moreover, their size depends on the average wage, making them pro‐cyclical. The automatic stabilizer programs like the unemployment benefit or the needs‐based assistance to the poor exist, but they are small in size and in coverage, hence have very little effect on income smoothing during the crisis. Those below the official poverty line can apply for the needs‐based, targeted assistance to the poor. But it is available for a limited time only (often it is in the form of one‐time assistance, or at maximum could last for six months during a given year), and the size of the assistance is quite modest. For example, in 2016 only 3 percent of the population were covered by the needs‐based assistance to the poor, and the average monthly size of the assistance was roughly 20 percent of the minimal consumption budget.

Given the deficiencies in the safety net’s ability to provide counter‐cyclical support, households were actively relying on in‐kind income as a mechanism of income and consumption smoothing during the crisis (Figure 21). In‐kind income can be quite substantial, averaging around 5 percent of cash income. Without in‐kind 18