Comparative Research of Internal and Border Regions: Analyzing the Differences in the Cyclical Dynamics of Industries for Industrial Policy and Territorial Development

Abstract

The differentiation in the development of regions remains a major challenge for the working out-of-state industrial and regional policies aimed at balanced and sustainable development. In theory, regional differences between internal and border regions can be explained by differences in natural resources, and economic and industrial potential, as well as by the existence of external boundaries. Border regions have higher risks in ensuring the geo-political sustainability of an industry. External boundaries, as well as differences in industry dynamics between regions, cycle stages, and industry trends, are often overlooked in industrial policy making, which in itself can be a factor of volatility. In this research based upon the Russian economy, we test the hypothesis that it is possible to define the industrial cycle with the help of the index of production. The analysis is based on the official Russian statistics from January 2005 to December 2021. To test the hypothesis, an original 12-step method of analysis was used, which allows such a mathematical model to be selected that will best describe the industry cycle and allows the trend to be estimated. The cyclic dynamics were assessed with the help of structural and parametric identification of modeling and the forecasting of trajectories of evolving dynamics based upon econophysics methodology, the use of median trends, and wavelet analysis. The comparative study was made based on the example of four sectors: the food, chemical, pharmaceutical (production of medicines and materials used for medical purposes), and automotive industries. The results show, first, that there are significant differences in the dynamics of industry cycles in both the internal and the border regions, which need to be taken into account to implement the progressive economic structure and specialization strategies of a region. Secondly, the group of border regions in the food, chemical, and pharmaceutical industries is growing at a higher rate.