Divergence and dispersion in the Russian economy

Abstract

While post-war economic development In market economies was characterised by geographical concentration of economic activity, this was not the case in the Soviet Union. Soviet economic development resulted in a highly dispersed economic landscape with mono-industrial towns scattered around the country. One plausible reason for this was low perceived transport costs as seen by Soviet planners. Another reason was that political and not only economic motives governed industrial location (Maurseth, 2001a). In addition to the sheer size of the country, these factors made the Soviet Union one of the most transport-intensive economies in the world. The post-Soviet Russian economic geography faces Russia with important challenges. Production, population and employment patterns are likely to change dramatically. There are at least four reasons for this hypothesis. The first is structural change in the Russian economy. Production patterns in Russia were highly distorted. In the future industrial production, and in particular heavy industry, will represent a smaller share of total production while consumer industry and services will probably experience relatively higher growth rates. The second reason to expect a changing economic geography is that transport costs are likely to increase. While the Soviet Union implicitly subsidised transport heavily, Russia now faces important challenges due to increasing transport prices. The third reason for expecting change is population changes. Recently, migration from the climatically least hospitable areas has been growing. In the future, these trends are likely to continue. Fourth, and partly as a consequence of the above-mentioned factors, market access will probably become more important for location of Russian industry. The Russian economic landscape is therefore likely to become more concentrated in the years to come.