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Essays on Russia’s Economic Transition

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  • Solanko, Laura

    ()
    (Bank of Finland Research)

Abstract

This study comprises an introductory section and three essays analysing Russia’s economic transition from the early 1990s up to the present. The papers present a combination of both theoretical and empirical analysis on some of the key issues Russia has faced during its somewhat troublesome transformation from state-controlled command economy to market-based economy. The first essay analyses fiscal competition for mobile capital between identical regions in a transition country. A standard tax competition framework is extended to account for two features of a transition economy: the presence of two sectors, old and new, which differ in productivity; and a non-benevolent regional decision-maker. It is shown that in very early phase of transition, when the old sector clearly dominates, consumers in a transition economy may be better off in a competitive equilibrium. Decision-makers, on the other hand, will prefer to coordinate their fiscal policies. The second essay uses annual data for 1992–2003 to examine income dispersion and convergence across 76 Russian regions. Wide disparities in income levels have indeed emerged during the transition period. Dispersion has increased most among the initially better-off regions, whereas for the initially poorer regions no clear trend of divergence or convergence could be established. Further, some – albeit not highly robust – evidence was found of both unconditional and conditional convergence, especially among the initially richer regions. Finally, it is observed that there is much less evidence of convergence after the economic crisis of 1998. The third essay analyses industrial firms’ engagement in provision of infrastructure services, such as heating, electricity and road maintenance. Using a unique dataset of 404 large and medium-sized industrial enterprises in 40 regions of Russia, the essay examines public infrastructure provision by Russian industrial enterprises. It is found that to a large degree engagement in infrastructure provision, as proxied by district heating production, is a Soviet legacy. Secondly, firms providing district heating to users outside their plant area are more likely to have close and multidimensional relations with the local public sector.

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File URL: http://www.suomenpankki.fi/en/julkaisut/tutkimukset/erillisjulkaisut/Documents/E36.pdf
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Bibliographic Info

Paper provided by Bank of Finland in its series Scientific Monographs with number E:36/2006.

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Length: 138 pages
Date of creation: 11 Nov 2006
Date of revision:
Handle: RePEc:hhs:bofism:2006_036

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Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland
Web page: http://www.suomenpankki.fi/en/
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Keywords: Russia; transition; regional issues; tax competition; infrastructure;

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References

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  1. Estache, Antonio, 2004. "Emerging infrastructure policy issues in developing countries - a survey of the recent economic literature," Policy Research Working Paper Series 3442, The World Bank.
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Cited by:
  1. Gluschenko, Konstantin, 2009. "Методы Анализа Межрегионального Неравенства По Доходам И Их Приложение К России
    [Methodologies of analyzing inter-regional incom
    ," MPRA Paper 18443, University Library of Munich, Germany.
  2. Libman, Alexander, 2009. "Essays on Asymmetric Federalism," MPRA Paper 21591, University Library of Munich, Germany.
  3. Hellqvist , Matti & Laine, Tatu, 2012. "Diagnostics for the financial markets – computational studies of payment system: Simulator Seminar Proceedings 2009–2011," Scientific Monographs E:45/2012, Bank of Finland.
  4. Alexander Libman, 2012. "Democracy, size of bureaucracy, and economic growth: evidence from Russian regions," Empirical Economics, Springer, vol. 43(3), pages 1321-1352, December.

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