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Investment Dynamics and Endogenous Growth Potential of Russian Regions

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  • Artyom Gennadyevich Isaev

    (Economic Research Institute FEB RAS)

Abstract

One of the main issues of the regional economic and investment policy of the Russian Federation is the search of endogenous growth sources of its regions. The well-known regional models do not consider this aspect, assuming external demand as the main source of regional growth. The dynamic properties of the regional economic system remain beyond these models. In this article the dynamic investment function based on a flexible accelerator model is estimated for regions of the Russian Federation grouped into 30 macro-regions. The function revealed empirically whether the regions have endogenous growth mechanisms that are reflected in the presence of feedbacks and lag responses. For each of the 30 macro-regions four variants of the function were evaluated, differing in the interpretation of the expected demand. First, options were considered when investment dynamics is determined by changes in demand inside and outside of the region. Second, each of the options is represented as a statistically observable and unobservable variable. Estimates show that for most regions parameter estimates are within expected ranges of values, and the investment dynamics follow a flexible accelerator model. For the regions with statistically significant estimates the values of accelerator and the speed of adjustment parameter were calculated. Accelerator values are higher, and the adjustment parameter is lower for the northern and eastern regions, compared with the regions of the western and central part of the country. This indicates that the latter are closer to their dynamic equilibrium, when investments annually cover most of the gap between actual and desired levels of capital. However, regional patterns of endogenous growth could not be identified on the basis of the estimates obtained. There was no statistical confirmation of the assumption that the endogeneity of regional development depends on the degree of diversification of regional economic structure. Thus, investment processes in regions with similar industrial specialization and comparable per capita incomes do not always follow the flexible accelerator model. This may indicate the presence of other sources of growth, which can be more adequately described by traditional regional models, and this must be taken into account when implementing regional investment policy. Based on a comparison of estimates with regional indicators characterizing the ratio of base and non-base industries (using regional export base model terminology), it is assumed that endogenous growth mechanisms exist in regions where base industries dominate, but not in all regions where intraregional demand prevails over external one. For a more accurate identification of regional patterns of endogenous growth a more accurate specification of intraregional demand is needed

Suggested Citation

  • Artyom Gennadyevich Isaev, 2019. "Investment Dynamics and Endogenous Growth Potential of Russian Regions," Spatial Economics=Prostranstvennaya Ekonomika, Economic Research Institute, Far Eastern Branch, Russian Academy of Sciences (Khabarovsk, Russia), issue 1, pages 18-38.
    • Handle: RePEc:far:spaeco:y:2019:i:1:p:18-38
    DOI: 10.14530/se.2019.1.018-038
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    References listed on IDEAS

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    1. A. P. Thirlwall, 2015. "A Model of Regional Growth Rate Differences on Kaldorian Lines," Palgrave Studies in the History of Economic Thought, in: Essays on Keynesian and Kaldorian Economics, chapter 12, pages 286-301, Palgrave Macmillan.
    2. Krishna Rao Akkina & Mehmet Ali Celebi, 2002. "The Determinants of Private Fixed Investment and the Relationship between Public and Private Capital Accumulation in Turkey," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 41(3), pages 243-254.
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    Cited by:

    1. Polbin, Andrey & Sinelnikov-Murylev, Sergey, 2024. "Developing and impulse response matching estimation of the DSGE model for the Russian economy," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 73, pages 5-34.

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    More about this item

    Keywords

    regional growth; investment; expected demand; flexible accelerator; Russia;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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