Factors of Growth in Russian Regions: Adapting to New Realities

Abstract

This paper presents the results of an analysis of the industrial dynamics in Russian regions in 2010–2016. The hypothesis is that the change in the Russian economic development model in the period 2014–2016 affected the economic situation in regions and activated economic dynamics factors that had no importance in previous periods. A set of factors is presented to describe the initial conditions for economic growth and the objective differences between regions as well as the regional economic structure, specific features and limitations of final demand, economic policy, and institutional conditions. Methodologically, the study relies on using extended production functions apparatus. Quantitative estimates of the contribution made by the factors to the dynamics of average GRP per capita of the regions in 2010–2015 are presented. It is shown that national trends were the key factors that controlled regional economic growth both in a favorable stable context and economic crisis context. This finding is confirmed by the estimates of regional dynamics obtained by the method of structural shifts. Factors associated with agglomeration economies and localization of the mining, agriculture, and the chemical industry were found to be statistically significant for the entire period under study. The importance of internal investment and consumer demand factors is higher for the period 2013–2015. At the same time, no fundamental change in the contribution of the factors has been established. Specifically, the factors characterizing regional innovation activity and the development of small entrepreneurship are not statistically significant. The areas of economic policy that most significantly affected regional growth are defined, such as stimulated investment and consumer demand. For 2015, a significant factor is the declining share of poor people.