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.
This paper is devoted to the explanation of selected bureaus’ behavior patterns in the soviet type of totalitarian dictatorships with the command economic model. It is a proven fact that the plan figures in the soviet economy were fabricated as a consequence of intrigues and secret negotiations between different interested parties. Generally, bureaus, as rational agents that minimize risk and maximize slack, should have been interested in reducing the plan figures, nevertheless, they strived to increase them. As examples, mass repression under dictatorships and overexpenditure of an administrative leverage at elections in non-democratic and quasi-democratic countries can be observed. In the article we develop a simple model of coordination between principal (dictator) and his agents (bureaus), which explain the mentioned paradoxical situation.