Understanding Russian Regions' Economic Performance during Periods of Decline and Growth: An Extreme-bound Analysis Approach

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Understanding Russian Regions' Economic Performance during Periods of Decline and Growth: An Extreme-bound Analysis Approach

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Rudiger Ahrend

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Rudiger Ahrend

Abstract

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.

Comprendre la performance économique des régions russes pendant les périodes de déclin et de croissance : Une approche par analyse de bornes extrêmes
Cet article adopte une approche par « analyse de bornes extrêmes » pour explorer les déterminants d’une croissance économique très inégale entre les régions russes. En utilisant des données couvrant 77 régions de 1993 à 2004, les déterminants de la croissance sont examinés pour la période de depression économique allant jusqu’à 1998, ainsi que pour la période d’expansion forte qui l’a suivie. Parmi 40 variables potentiellement importantes pour la croissance, sont déterminées, pour chacune des deux périodes, les variables associées de façon robuste à la performance économique russe. Les variables examinées incluent des aspects politico-institutionnels, des indicateurs des reformes économiques, ainsi que les conditions initiales économiques et non-économiques de ces régions. Les résultats principaux, dérivant d’un nombre de régressions atteignant presque un million, sont les suivants: pendant la période de stagnation se déroulant jusqu’en 1998, les différences de croissance entre régions sont expliquées presque entièrement par les conditions initiales, en termes de ressources naturelles, de capital humain, de structure industrielle, et de situation géographique. Toutefois, depuis la crise de 1998, l’influence de ces dernières a considérablement diminué, et seules la richesse pétrolière et une situation géographique avantageuse sont demeurées importantes. Une politique de réformes économiques, ainsi que la plus grande qualité des dirigeants régionaux, ont commencé à avoir un impact important. Ces résultats suggèrent que les facteurs de la croissance économique en période de déclin sont différents de ceux prévalant pendant les périodes “normales” de croissance positive.

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Paper provided by OECD, Economics Department in its series OECD Economics Department Working Papers with number 644.

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Date of creation: 10 Oct 2008
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Handle: RePEc:oec:ecoaaa:644-en

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Find related papers by JEL classification:
O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
O52 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Europe
P2 - Economic Systems - - Socialist Systems and Transition Economies
R11 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Analysis of Growth, Development, and Changes

This paper has been announced in the following NEP Reports:

NEP-ALL-2008-10-21 (All new papers)
NEP-GEO-2008-10-21 (Economic Geography)
NEP-TRA-2008-10-21 (Transition Economics)

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