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Regional disparities and economic growth in Russia: new growth patterns and catching up

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Abstract

The regional disparities in Russia are increasing since transition started in the 1990s, as result of the structural processes of reorganisation and reallocations of resources taking place in the territory. The scopes of this contribution are two folds: to clarify the theoretical and policy background in analysing regional development in the transition and in particular in Russia, and to analyse the specificity of the spatial development and the regional disparities patterns in Russia. The economic geography is recognised among the different theories, very useful for helping to understand in particular the recent phenomena of new concentration pattern in Russia, giving a key of analysis of new polarisation trends: new trends toward urban concentrations in the Western regions, de-population of the Eastern regions, rural decline in those regions faraway from large urban agglomerations. In fact the empirical analysis indicates two dominant phenomena in the up-surging of regional disparities: the increasing weight of the capital city, Moscow as agglomeration effects brings the polarisation phenomena; and the strengthening of the natural resources and energy endowed regions. There is the question whether Russia, at this stage of development, can pursue an active regional policy toward equity targets or whether, for the target of sustaining macro-economic growth, there is the urgency to keep selected priorities based on the best performing poles. A difficult balance between the two targets would be the most suitable answer.

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Notes

  1. An excessive simplification of likely market development applied to an economy that has deep structural unbalances consolidated in its past old and recent history, like Russia, could be inappropriate also because distortions to market development, as have emerged since transition started, seem to indicate that fundamental barriers to competition and mobility of factors could likely for long subsist, making highly unpredictable the degree by which abstract stylised market functioning will fully operate in the national and, even more, in the regional context.

  2. In the previous planning system the location of investments did not affect heavily the regional wealth, as far as the resources were centrally managed and the regional revenues were result mainly from the redistribution—through the various instruments employed like price structure, discriminatory tax system, budgetary transfers, subsidies etc.—that were ensured centrally by the State planning. Thus the regional incomes originated in the regions, were lower than the revenue per capita at disposal, because of the importance of the transfers achieved by central planning. This confirms the fundamental role of the State as central re-distribution based on strong “equity” criteria, contributing to soft the regional gaps—considering the “regional specialisation patterns”.

  3. The non correspondence between morphological (land use), functional (services provision or labour market dimension) and administrative (the formal administrative entity) boundaries, since each of them is based on different criteria, makes the identification of the “region” most problematic. Thus, each of these different spatial dimension would require different level of analysis, giving different pictures. The administrative territorial level remains, however, the most employed in regional studies, as it is at this level that statistical data are most available, considering also that it corresponds to policy-maker (institutional) responsibility (within the administrative boundaries).

  4. It is also in this perspective, that in 2004 Putin had forbidden to regional administrations to enforce the creation of any Free Economic Zones, the special zones with fiscal incentives for foreign investors, in order to prevent the consolidation of too strong local economic powers, that could might have escaped to State’s control, the FEZ enjoying of high degrees of legal and fiscal freedom, beyond the national rules.

  5. The capacity of the Okrug to act as instrument of control by the State over the legislative activities of the regional administrations, seem to have been relatively successful, if it is measured the number of cases where regional laws have been abolished. From other perspectives, their operations and effectiveness, on the contrary, remain typically heavily linked to bureaucratic functioning. In the last few years there is an attempt to enlarge their competencies toward the assumption also of some economic responsibilities, considering their large territorial coverage, characterised by several common economic features.

  6. As for instance in Algeria, De Bernis during the 1970s have developed a model on the base of the poles of development of Perroux, by which the oil industry and its related transformation industry, would become the starting poles of growth for stimulating industrialisation, in a traditionally rural and agricultural country. The induced inward and outward effects would have brought a process of spreading of additional investments in other intermediary sectors, sustaining economic growth in the territory around and creating diffused induced effects.

  7. From the failure of the Italian experience of industrialisation of the southern regions in the 1950s–1960s.

  8. Not clear theoretical mention to the “development pole growth” theory has never been made by the Soviet economic literature at that time.

  9. Bandman was the economist at the Siberian Institute of Economy, at the USSR Academy of Science of Novosibirsk during the 1970s, that promoted the “TPK” in a territorial perspective, relatively new for the Soviet type system, overcoming the strictly sectoral/vertical notion of the old industrial complexes, that dominated in the Soviet Union until the 1980s.

  10. The industrial clusters can be brought as an example of such diffusion by “spots”, since they reproduce a smaller type of concentration over the territory ensuring “economies of scale”, through their horizontal or vertical integration.

  11. Fallon (1998) “Dispersion of Sub-National Regional Income Per Capita”, Knowledge Management System, The World Bank see also Czyzewski (1999) “Comments on economic growth and convergence of Poland’s regions. Analysis of per capita regional GDP volumes 1986–1996” RECESS Research Bulletin 1/1999.

  12. This is not always the case as dispersion is relatively low in India and high in Thailand where large income differentials persist between Bangkok and the rest of the country.

  13. We used the V u measure instead V w because more observations on the former appeared in the table.

  14. Balcerowicz and Gelb (1994).

  15. Czyzewski et al. (1996).

  16. op.cit

  17. World Bank 2004, Russia Country Economic Memorandum

  18. GUS, 1997, Hidden Economy

  19. One consideration in measuring inequalities across regions using per capita income is that most regional data have been deflated using national price indices, which mask differences in cost of living or factor costs. For a few countries where regional price indices exist, series have been constructed using them.

  20. See World Bank (2004) chapter on re-shifting of trade margins services to oil production.

  21. The conclusion is very weak, because of a small number of observations and should be red as an indicator of the likely relationship.

  22. For illustrative purposes tables are presented for 6 macro-districts only.

  23. The World Bank’s Country Economic Memorandum on Russia discusses problems with GDP measurement, indicating that share of services in GDP is overestimated due to improperly counted mark up on oil transport and sales by transfer pricing.

  24. From Transition to Development, A Country Economic Memorandum for the Russia Federation, World Bank (2004, p.11), Table B2.

  25. In current prices, authors’ calculations based on GOSKOMSTAT data.

  26. The ideal solution would be to simulate what would be the price of oil in the open economy (which would be different from the current world price of Russia oil). New oil price, unique for domestic and foreign markets (adjusted for transport costs) in turn would change relative prices of other commodities and services and would affect the size and composition of GDP. To conduct the experiment one would use the CGE type of model.

  27. WB study (2004), op.cit.

  28. Current GDP values in roubles consistent with regional GDP figures and oil production quantities in natural units at national level, consistent with regional data from RUSSIA REGIONS, which are used for regional comparisons are slightly different from respective national data published in statistical yearbooks, which we used for the macroeconomic assessment.

  29. Quoted Word Bank study addresses the issue with regard to the sectoral composition of output At national level.

  30. More actual data at regional level were not available.

  31. It looks like the value of oil output at the producer level was calculated using oil prices for domestic use whereas value of oil sales abroad (attributed to oil trading companies) was calculated using prices obtained in export transactions.

  32. The World Bank Report on Russia (2004) underlines as inevitable outcome, the de-population of far-away regions because of loosing attractiveness for life conditions: against such spontaneous trend no other measures would need to be taken, following this point of view. However Russia cannot simply leave to the decline these regions that represent a great potential for its growth, given the size of the resources there located. China, at the border with Siberia and Far East, is in fact strategically interested on these regions and clearly this requires conversely also a conducive policy from the Russian side, in order to give more economic perspective to those regions, other than the exploitation of natural resources.

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  1. Centre for Europe, Euro-Asia and Mediterranean countries (CENCODE), University of Bologna in Ravenna, Via Oberdan, 1, 48100, Ravenna, Italy

    Roberta Benini

  2. National Bank of Poland, Warsaw, Poland

    Adam Czyzewski

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  2. Adam Czyzewski
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Correspondence to Roberta Benini.

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Benini, R., Czyzewski, A. Regional disparities and economic growth in Russia: new growth patterns and catching up. Econ Change 40, 91–135 (2007). https://doi.org/10.1007/s10644-007-9026-0

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