Theoretical analysis of development traps: On the example of Russia

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

Journal of the New Economic Association, 2022, vol. 54, issue 2, 56-74

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.

Keywords: development trap; economic growth; Ramsey model; convex-concave production function (search for similar items in EconPapers)
JEL-codes: E1 E13 O1 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:nea:journl:y:2022:i:54:p:56-74

DOI: 10.31737/2221-2264-2022-54-2-3

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