Understanding Russian Regions' Economic Performance During Periods of Decline and Growth - An Extreme Bound Analysis Approach
Organization for Economic Co-Operation and Development (OECD) - Economics Department (ECO)
October 10, 2008
OECD Economics Working Paper No. (2008)52
This article uses extreme-bound-type analysis to revisit the determinants behind widely differing economic growth in Russian regions. Using data of 77 regions for 1993-2004, it separately examines the growth drivers for the phase of economic decline up to 1998, and for the period of strong growth afterwards. Looking at forty variables considered to be potentially related to growth, it determines, for each of the two periods, the ones robustly associated with Russian economic performance. Among the variables considered are proxies of politico-institutional features, indicators of economic reform, and measurements of both economic and non-economic initial conditions. The main findings, based on close to one million regressions, are as follows: during the period of economic decline up to 1998, differences in Russian regional growth were almost entirely driven by initial conditions, with resource and human capital endowments, industrial structure, and geographical location playing the dominant roles. However, since the 1998 crisis, the importance of initial conditions has declined significantly, and is now basically reduced to hydrocarbon wealth and advantageous geographical location. More reform-oriented policies, as well as better regional leadership are found to have come to make a significant difference. These results point to determinants of economic performance in periods of actual economic decline being quite different from those in normal times of economic growth.
Number of Pages in PDF File: 28
Keywords: Russia, transition, regional economics, extreme-bound analysis, economic growth, natural resources, initial conditions, economic reform, political economy
JEL Classification: O4, O52, P2, R11
Date posted: November 18, 2008
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