Convergence between Russian regions

Sergei Guriev and Elena Vakulenko

No w0180, Working Papers from Center for Economic and Financial Research (CEFIR)

Abstract: In this paper we study convergence among Russian regions. We find that while there was no convergence in 1990s, the situation changed dramatically in 2000s. While interregional GDP per capita gaps still persist, the differentials in incomes and wages decreased substantially. We show that fiscal redistribution did not play a major role in convergence. We therefore try to understand the phenomenon of recent convergence using panel data on the interregional reallocation of capital and labor. We find that capital market in Russian regions is integrated in a sense that local investment does not depend on local savings. We also show that economic growth and financial development has substantially decreased the barriers to labor mobility. We find that in 1990s many poor Russian regions were in a poverty trap: potential workers wanted to leave those regions but could not afford to finance the move. In 2000s (especially in late 2000s), these barriers were no longer binding. Overall economic development allowed even poorest Russian regions to grow out of the poverty traps. This resulted in convergence in Russian labor market; the interregional gaps in incomes, wages and unemployment rates are now below those in Europe. The results imply that economic growth and development of financial and real estate markets eventually result in interregional convergence.

Keywords: Convergence; economic growth; Russian regions; financial development; migration. (search for similar items in EconPapers)
JEL-codes: J61 R23 (search for similar items in EconPapers)
Pages: 82 pages
Date: 2012-10
New Economics Papers: this item is included in nep-cis, nep-cwa, nep-geo, nep-pbe, nep-tra and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (48)

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Working Paper: Convergence between Russian regions (2012)
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