Abstract
This paper investigates the determinants of economic growth, while paying special attention to the role of export and spatial externalities. We hypothesise that not industry variety per se but variety of related industries significantly contributes to economic growth in Russian regions. First, we test for the existence of spatial dependence in economic growth across Russian regions using three traditional indicators of technological progress. Second, we construct a simple theoretical model where economic growth is exogenously determined and depends primarily on export externalities. The paper shows that export externalities have a positive and significant impact on employment growth in most sectors of the economy. Simultaneously, spatially lagged export productivity has varying effects on employment growth depending on the sector, which is decelerating economic growth in industrial sectors and accelerating economic development in the most advanced service sectors.
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