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Theoretical analysis of development traps: On the example of Russia

Author

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  • Golub, A.

    (International Laboratory for the Study of Sustainable Development Problems, IPEI, Russian Presidential Academy of National Economy and Public Administration (RANEPA), Moscow, Russia)

  • Potashnikov, V.

    (International Laboratory for the Study of Sustainable Development Problems, IPEI, Russian Presidential Academy of National Economy and Public Administration (RANEPA), Moscow, Russia)

Abstract

Russia still has a large pool of high-quality human capital and, despite certain limitations, access to the advanced technologies needed for transition from a resource-based to a knowledge-based economy. Despite this potential, the gap between Russia and the developed countries was not narrowing for the last ten years. Russian economy falls into a development trap. The paper offers a theoretical analysis of the development trap. It provides solutions that may help to escape the development trap and close the income gap with the developed countries. The Ramsey model with a convex-concave production function is used for the paper. The convexity of the function is the cause of multiple equilibria. Country may move to a higher equilibrium, but under certain conditions a country cannot overcome the "gravity" of a lower equilibrium and remain in development trap. High investment risks, dependence on the export of fossil fuels and excessive investment in resource and energy-intensive industries led the Russian economy into a development trap. Convergence Russia with the most developed countries with high per capita incomes requires a profound diversification of the Russian economy grounded on a massive replacing natural resources and resource-intensive industries with the human capital.

Suggested Citation

  • Golub, A. & Potashnikov, V., 2022. "Theoretical analysis of development traps: On the example of Russia," Journal of the New Economic Association, New Economic Association, vol. 54(2), pages 56-74.
    • Handle: RePEc:nea:journl:y:2022:i:54:p:56-74
    DOI: 10.31737/2221-2264-2022-54-2-3
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    More about this item

    Keywords

    development trap; economic growth; Ramsey model; convex-concave production function;
    All these keywords.

    JEL classification:

    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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