The Asymmetric Spatial Effects for Eastern and Western Regions of Russia

Abstract

The purpose of this study is to identify the spatial effects of the main macroeconomic indicators of the eastern and western regions of Russia. These regions differ significantly in population density and the distances between cities. The main research question we are interested in is the following: how are events occurring in one of the western regions, such as economic growth or a decrease in the unemployment rate, effecting similar indicators in other western and eastern regions. The spatial effects of the western and eastern regions, when considered separately, may differ both qualitatively and with of the ‘flow on effect’. The determinants of the same macro-economic indicators in the eastern and western regions may also differ. In order to test the hypothesis of a possible difference in the spatial effects and determinants for these regions, we have developed a special class of model with four spatial matrices (west-west, east-east, west-east, and east-west) and a double set of control variables (one for each type of region). As the macroeconomic indicators monitor the rate of unemployment in the region, the real regional wage and GRP growth for the year were chosen for our models. We controlled the variables describing the socio-demographic situation in the region, migration processes, economic development, and export-import activity in the region. The models were estimated by the Arellano-Bond method on panel data for Russian regions over 2000-2010. Our analysis revealed, 1) a positive spatial correlation of the main macroeconomic indicators for the western regions, 2) both positive and negative externalities for the eastern regions and 3) the asymmetric influence of eastern and western regions on each other. Usually “impulses” from the western regions have a positive effect on the eastern regions, but the “impulses” from the eastern regions usually do not affect the western regions.