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Russia's Regions: Income Volatility, Labor Mobility and Fiscal Policy

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  • Goohoon Kwon
  • Mr. Antonio Spilimbergo

Abstract

Russia's regions are heavily exposed to regional income shocks because of an uneven distribution of natural resources and a Soviet legacy of heavily skewed regional specialization. Also, Russia has a limited mobility of labor and lacks fiscal instruments to deal with regional shocks. We assess how these features influence the magnitude and persistence of regional income shocks, through a panel vector autoregression, drawing on extensive and unique regional data covering last decade. We find that labor mobility associated with regional shocks is far lower than in the United States yet higher than in the EU-15, and that regional expenditures tend to expand in booms and contract in recessions. We discuss institutional factors behind these outcomes and policy implications.

Suggested Citation

  • Goohoon Kwon & Mr. Antonio Spilimbergo, 2005. "Russia's Regions: Income Volatility, Labor Mobility and Fiscal Policy," IMF Working Papers 2005/185, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2005/185
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    Cited by:

    1. Terrell, Katherine & Jurajda, Štěpán, 2007. "Regional Unemployment and Human Capital in Transition Economies," CEPR Discussion Papers 6569, C.E.P.R. Discussion Papers.
    2. Vadim Napalkov & Anna Novak & Andrey Shulgin, 2021. "Variations in the Effects of a Single Monetary Policy: The Case of Russian Regions," Russian Journal of Money and Finance, Bank of Russia, vol. 80(1), pages 3-45, March.
    3. Nienke Oomes & Oksana Dynnikova, 2006. "The Utilization-Adjusted Output Gap: Is the Russian Economy Overheating?," IMF Working Papers 2006/068, International Monetary Fund.
    4. repec:zbw:bofitp:2013_013 is not listed on IDEAS
    5. International Monetary Fund, 2006. "Russian Federation; Selected Issues," IMF Staff Country Reports 06/430, International Monetary Fund.
    6. Stillman, Steven & Velamuri, Malathi & Aitken, Andrew, 2010. "The long-run impact of New Zealand's structural reform on local communities," Journal of Comparative Economics, Elsevier, vol. 38(4), pages 432-448, December.
    7. Michaelides, Panayotis & Milios, John, 2009. "TFP change, output gap and inflation in the Russian Federation (1994-2006)," Journal of Economics and Business, Elsevier, vol. 61(4), pages 339-352, July.
    8. Thomas Herzfeld, 2008. "Inter-regional output distribution: a comparison of Russian and Chinese experience," Post-Communist Economies, Taylor & Francis Journals, vol. 20(4), pages 431-447.
    9. Elena Vakulenko, 2016. "Does migration lead to regional convergence in Russia?," International Journal of Economic Policy in Emerging Economies, Inderscience Enterprises Ltd, vol. 9(1), pages 1-25.
    10. Markus Eller & Jarko Fidrmuc & Zuzana Fungáčová, 2016. "Fiscal Policy and Regional Output Volatility: Evidence from Russia," Regional Studies, Taylor & Francis Journals, vol. 50(11), pages 1849-1862, November.
    11. Gluschenko, Konstantin, 2006. "Biases in cross-spave comparisons through cross-time price indexes: the case of Russia," BOFIT Discussion Papers 9/2006, Bank of Finland Institute for Emerging Economies (BOFIT).
    12. Mr. David Hauner, 2007. "Benchmarking the Efficiency of Public Expenditure in the Russian Federation," IMF Working Papers 2007/246, International Monetary Fund.
    13. Hauner, David, 2008. "Explaining Differences in Public Sector Efficiency: Evidence from Russia's Regions," World Development, Elsevier, vol. 36(10), pages 1745-1765, October.
    14. Sergei Guriev & Elena Vakulenko, 2012. "Convergence between Russian regions," Working Papers w0180, New Economic School (NES).
    15. Markus Eller & Jarko Fidrmuc & Zuzana Fungáčová, 2016. "Fiscal Policy and Regional Output Volatility: Evidence from Russia," Regional Studies, Taylor & Francis Journals, vol. 50(11), pages 1849-1862, November.

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    More about this item

    Keywords

    WP; income; Russia; revenue; fiscal policy; panel VAR; labor mobility; countercyclical fiscal policy; income volatility; Russia's region; revenue windfall; income growth; Personal income; Income shocks; Oil; Europe;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers
    • P52 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies

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