Russian Manufacturing and the Threat of 'Dutch Disease' - A Comparison of Competitiveness Developments in Russian and Ukrainian Industry

Abstract

This paper examines the development of Russian industry in comparison with that of Ukrainian industry during 1995-2004 in an effort to ascertain to what extent, if any, Russian manufacturing showed signs of succumbing to 'Dutch disease'. Ukraine and Russia began the market transition with broadly similar institutions, industrial structures and levels of technology, and the economic reforms implemented in the two countries were also similar, although Ukraine was reckoned to lag behind Russia in many areas. The main difference between them is Russia's far greater resource wealth. It follows that differences in industrial development since 1991 may to some degree be attributable to differences in initial natural resource endowments. In short, Ukraine could provide a rough approximation of how a resource-poor Russia might have developed over the transition.

Keywords: Russia, Ukraine, Dutch disease, natural resources, oil, gas, transition, industry, productivity, competitiveness, revealed comparative advantage, restructuring, unit labour costs, wages

JEL Classification: J24, L60, O57, P23, P27, Q33