Before the Isolation: Russian Regional β-Convergence 2001–2019 Before the Pandemic and Ukrainian War

Abstract

Using a general method of moments (GMM) aggregate production function adjusted for spatial autocorrelation, Russian regions 2001–2019 are found to exhibit no β convergence/divergence before 2009, 1% convergence 2009–2014 and then none again 2015–2019. Both human and physical capital contribute to aggregate growth as neoclassical theory predicts. Spatial autocorrelation suggests the measurement of spatial regional interdependence in Russia is more complex than in the U.S., EU or Mexico with the standard use of adjacent borders or railroad distances data not cap‑ turing regional interdependency. At the beginning of 2020, Russia’s regions had not transitioned to intensive instead of extensive growth making regional growth stagnation and no further convergence likely in the decade to come.

Keywords: Russian regions, human capital, convergence

JEL Classification: R12, C23, O47