Industrial Development, Structural Changes, and Industrial Policy in Russia
The chapter is devoted to the analysis of industrial development in Russia since 2005. Characteristic features of the Russian industry are considered. It is shown that Russian industry is specific both by its structure and high heterogeneity. The mining and quarrying sector and related manufacturing industries play a significant role in the Russian economy and major role in industrial production. In the foreseeable future, these sectors can strengthen their leading positions.
Considerable attention is paid to the analysis of industrial policy of the Russian government, which has traditionally been one of the leading actors of industrial development. The main directions of industrial policy are singled out: compensation of negative changes, catching-up, and advance development. It is noted that the role of government is ambivalent: on the one hand, it seeks to develop high-performing companies, including new and fast-growing ones, on the other hand, it often supports large, low-performing enterprises. With the declared continuously emphasis of industrial policy on innovation and modernization, low innovativeness of Russian companies remains. Based on the analysis of modern conditions, as well as new objects and instruments of industrial policy, some prospects for future industrial development have been revealed.
Among key problems of strategic development of the Russian Federation – a gain of the advanced positions in a global competition, an exit on standards of a life of the developed countries. Methods of achievement of the proclaimed priorities among which predominate an emphasis on realisation of innovations and optimisation of use of regional and human potentials are defined also. It means also working out of essentially new domestic industrial policy which main objective – stimulation of transition of a national economy on the way of development allowing a science and hi-tech sectors of the industry to become by the locomotive of economic growth, to provide adequate conditions for development for industrial sector of economy. Many questions concerning a theme of research carried out in the given collection, successfully dare in the European countries. Therefore studying a positive European experience important for decrease in vulnerability of domestic economy in the face of many global problems. These problems demand today adequate reactions at level of an industrial policy, start of new industrial strategy. In this work it is a lot of the specific proposals directed on the further development of the Russian industry. Authors have formulated both new tactical and strategic ideas, not ordinary decisions for achievement of leadership in the field in the future.
Effective property rights protection plays a fundamental role in promoting economic performance. Yet measurement problems make the relationship between property rights and entrepreneurship an ambiguous issue. As an advancement on previous research in this paper we propose a new approach to the evaluation of the security of property rights based on direct measures that overcomes some limitations of previous studies. We apply this new metrics to a survey of manufacturing firms in Russia to identify the economic effects associated with the lack of property protection in a transition economy. Our analysis supports the view that there is a close relationship between institutions, property rights and economic growth. Our findings confirm that redistributive risks provide a depressing effect on investment and innovative activity of manufacturing enterprises and potentially result in a huge loss in efficiency and economic growth, which in other institutional settings could have been avoided.
In this paper we study convergence among Russian regions. We find that while there was no convergence in 1990s, the situation changed dramatically in 2000s. While interregional GDP per capita gaps still persist, the differentials in incomes and wages decreased substantially. We show that fiscal redistribution did not play a major role in convergence. We therefore try to understand the phenomenon of recent convergence using panel data on the interregional reallocation of capital and labor. We find that capital market in Russian regions is integrated in a sense that local investment does not depend on local savings. We also show that economic growth and financial development has substantially decreased the barriers to labor mobility. We find that in 1990s many poor Russian regions were in a poverty trap: potential workers wanted to leave those regions but could not afford to finance the move. In 2000s (especially in late 2000s), these barriers were no longer binding. Overall economic development allowed even poorest Russian regions to grow out of the poverty traps. This resulted in convergence in Russian labor market; the interregional gaps in incomes, wages and unemployment rates are now below those in Europe. The results imply that economic growth and development of financial and real estate markets eventually result in interregional convergence.
The modern concept of modernizing Russia somehow reproduce the history of the theory of innovation. The theory of innovation in its development has gone through a least 3 stages. In the first phase (1910 - first half of the 40s) to the forefront issues of understanding the nature of innovation and their role in the development of society over time (long, medium and short periods), the relationship of innovation and long cycles conditions. This period is associated with the names of J.A.Schumpeter, M.I.Tugan-Baranovsky and N.D. Kondratieff. The second stage in the development of innovation theory (second half 1940 - first half of the 1970s) is characterized by the increased role of macroeconomic analysis, in turn, he has at least two substages: the first of which was dominated by the ideas of neo-Keynesians, on the second-neoclassical. The third stage of development of the theory of innovation began in the mid-1970s and proldolzhaetsya to the present. It is characterized by an offensive alternative approach to macroeconomic theory. With a certain degree of conditionality is also possible to distinguish two substages. The first (second half of the 1970s - early 1990s) is characterized by the emergence of new ideas drawn from evolutionary theory, institutionalism (the theory of the firm) and management (innovation management). In the second substage (mid 90s) innovations studied by the methods of systems analysis. The authors are increasingly focused on issues of comparative studies: a comparative analysis of innovation policy in different countries, study the ways and means of forming an effective innovation systems. In the report it is critically considered not only the official point of view, but also M. Porter, K. Ketels work “Competitiveness at the Crossroads: Choosing the Future Direction of the Russian Economy”. Also «The forecast of innovative, technological and structural dynamics of Russian economy till 2030» and RAND Corporation report “The Global Technology Revolution 2020: Trends, Drivers, Barriers, and Social Implications” are analyzed. In this paper institutional preconditions and possibilities of application of the concept of social market economy in the 21st century Russia were analyzed. Basic elements of social market economy are personal liberty, social justice, and economic efficiency.
The economic crisis has uncovered three negative Russian tendencies that created institutional obstacles for market economy growth during the last decade: deepening of raw materials specialization, wear and tear of the equipment, gap in scientific and technical progress, and strengthening of the government. To stop these negative tendencies and overcome economic crisis it is necessary to reform developed institutes.
The major problem of the Russian economy is its low performance level. Overcoming development gap in comparison with developed countries will become possible only with the help of innovations. This means that process of generating and using Schumpeterian-type innovations should become the key factor of economic development. It is necessary to note that innovative activity of businessmen can be present in various forms. Depending on existing game rules business activity can get not only productive (J. A. Schumpeter’s creative destruction), but also unproductive (rent seeking) orientation.
The “Concept 2020” analyses the global challenges which Russia faces in its development that amplify high level of social inequality and regional differentiation, preservation of barriers to conducting enterprise activity, weak interrelation of education, science and business, absence of necessary competition in various markets and low level of social capital development. Under these conditions, as A. Gerschenkron wrote, the government becomes the leading factor of economic modernization, and it is its representatives that try to shape the concept of long-term socio-economic development of the country.
It is supposed that gross national product growth will be provided, mainly, by means of priority development of labour productivity and large capital assets investments. Our calculations show they considerably advance growth of productivity and gross national product, and that will lead to increase in a capital intensity of production and falling yield on capital investment. The arising gap between export and import, according to authors of the Concept, will be covered by the accruing inflow of foreign capital.
However the main drawback is the mechanism of maintaining economic growth. Defining concrete aims of development is an important, but an insufficient condition. The institutional mechanism of private sector development stimulation is not developed at all. Meanwhile, sharp increase of expenses on social sphere will raise the question about budget spending. It can be reached either by increase in taxes or by public sector expansion.
In the report it is critically considered not only the official point of view, but also Porter M., Ketels K. “Competitiveness at the Crossroads: Choosing the Future Direction of the Russian Economy”, «The forecast of innovative, technological and structural dynamics of Russian economy till 2030», and RAND Corporation report “The Global Technology Revolution 2020: Trends, Drivers, Barriers, and Social Implications” devoted to tendencies of development of 16 technologies in 29 countries and other forecasts.
In this paper we analyze institutional preconditions and possibilities of application of the concept of social market economy in the 21st century Russia. Basic elements of social market economy are personal liberty, social justice, and economic efficiency.
Personal liberty assumes trust strengthening between agents, development of guarantees of private property, and regular economic policy promoting freedom.
With social justice present market economy promotes social development and strengthens middle class. Democracy will allow to break administrative barriers and to create public control. Social justice also includes address support of vulnerable regions of Russia.
Economic efficiency should be directed towards creation and maintenance of competitive order, strengthening of antimonopoly activity and improving fair entrepreneur’s image. This will make Russia more attractive for workers from abroad and help it develop integrative relations with neighboring countries.
All these measures will raise economic efficiency while creating preconditions for a fast overcoming of the crisis and increasing the well-being and the acceleration of economic development of Russia.
Institutions affect investment decisions, including investments in human capital. Hence institutions are relevant for the allocation of talent. Good market-supporting institutions attract talent to productive value-creating activities, whereas poor ones raise the appeal of rent-seeking. We propose a theoretical model that predicts that more talented individuals are particularly sensitive in their career choices to the quality of institutions, and test these predictions on a sample of around 95 countries of the world. We find a strong positive association between the quality of institutions and graduation of college and university students in science, and an even stronger negative correlation with graduation in law. Our findings are robust to various specifications of empirical models, including smaller samples of former colonies and transition countries. The quality of human capital makes the distinction between educational choices under strong and weak institutions particularly sharp. We show that the allocation of talent is an important link between institutions and growth.
Labor productivity is the most important factor in the economic growth of the region. Traditional production functions assess the contribution of labor resources to three-fourths of the total one. But today there are new factors, the inclusion of which in the model is necessary, since they determine the key forces of economic development, identify the direction of regional policy.
Economic growth, according to neoclassical theory and the theory of endogenous growth, is influenced by labor resources: population density, quality of labor, the level of employment, investment in human capital, labor productivity. The role of human capital in the models of endogenous growth is considered at two angles: through the ability to generate knowledge and innovative development and as an independent factor - the accumulation of human capital in the region is the basis of economic growth.
The article analyzes classical and modern approaches to assessing the impact of labor resources on economic growth, shows the role played by production functions in such approaches. The characteristic of the main trends of the economic growth of the Russian regions is given, the analysis of development of labor resources and efficiency of their use is made. Production functions such as the Cobb-Douglas type are constructed for the Russian regions, showing the contribution of labor and capital to economic growth, and the statistical significance of these factors is determined. The study was conducted for 83 regions of Russia for the period from 1995 to 2015.
The study will identify the main trends of the impact of the labor force to economic growth, to form the main conclusions for economic policy in the regions of Russia.
One of the basic factors of economic growth in the information knowledge - based economy is the innovation component determined by the level of intellectual capital usage. Of the specifics in the usage of intellectual capital is that the cost evaluation of intellectual resources on the macro-level as a factor of economic growth is extremely difficult and there are more evaluation possibilities on the micro-level. The risk's estimation based on making use of discount theory.