Economic Development, Geography, and Trade: Evidence from Russian Regions, 2000-2012

Abstract

This paper deals with the problem of economic growth and spatial development in Russia. It follows a theoretical framework of economic geography in terms of factors of the first and the second nature. According to economic geography, natural resource endowment, transportation costs, distance to markets and population distribution among other factors produce strong influence on economic performance of countries and regions. Using data for Russian regions, we test the effect of these factors on the level of economic development in Russian regions during 2000-2012, when they achieved high rates of growth. Our results support earlier theoretical and empirical findings in several aspects. First, we observe a positive effect of trade on economic growth in Russian regions during the period under review. Second, the first nature factors included as a distance to two main trading partners, Berlin and Beijing, were significant determinants of improvements in the levels of economic development across Russian regions. This work differs from others by the fact that we control for natural resource endowment in order to minimize the resource rent effect on regional economic growth in Russia.