A Tale of Two City-States; Novgorod and Pskov in the 1990s

This paper examines two regions of the Russian Federation, Novgorod and Pskov, to compare how differences in economic policy affect economic development. Despite common histories, geography and natural resources, Novgorod committed early on to policies that would attract foreign investments in production. Pskov, on the other hand, withdrew into protectionist policies until it was clear that efforts to increase domestic and foreign investment levels were needed. Using available statistics, we consider the reasoning that led these regions down such distinctly different economic policy paths – and consequences of these choices.Russia; regions; Novgorod; Pskov

Fiscal competition in a transition economy

The paper analyses fiscal competition for mobile capital between identical regions in a transition country. A framework similar to Keen-Marchand (1997) is used to analyse welfare effects of regional competition. It is shown that in very early transition when the share of the old sector is overwhelming, consumers in a transition economy may be better off in a competitive equilibrium. The decision-makers, however, would prefer to coordinate their fiscal policies.tax competition; fiscal competition; transition

Fiscal competition in a transition economy

The paper analyses fiscal competition for mobile capital between identical regions in a transition country. A framework similar to Keen- Marchand (1997) is used to analyse welfare effects of regional competition. It is shown that in very early transition when the share of the old sector is overwhelming, consumers in a transition economy may be better off in a competitive equilibrium. The decision-makers, however, would prefere to coordinate their fiscal policies.tax competition, fiscal competition, transition

Coping with missing public infrastructure: An analysis of Russian industrial enterprises

During the Soviet period industrial firms not only formed the backbone of the economy but also directly provided a wide range of benefits to their municipalities. Firms were in charge of supplying a great variety of social services, such as housing, medical care and day care. The need to divest at least some of these functions was generally accepted already in the early 1990s. Industrial firms' engagement in the provision of infrastructure services, such as heating, electricity and road upkeep has to date received much less attention. Using a unique dataset of 404 large and medium-sized industrial enterprises in 40 regions of Russia, this paper examines public infrastructure provision by Russian industrial enterprises. We find that, first, to a large degree engagement in infrastructure provision – as proxied by district heating production – is a Soviet legacy. Second, firms providing district heating to users outside their plant area are more likely to have close relations with the local public sector along many other dimensions.Russia; infrastructure; firm performance

An empirical note on growth and convergence across Russian regions

This empirical note uses publicly available Goskomstat data to investigate income growth and convergence across Russian regions. Using data for 1992-2001, we find strong sigma divergence simultaneously with beta convergence. he results indicate that per capita income in Russian regions may be converging towards two separate steady states. The poorest regions seem to be converging among themselves, while growth experiences among other regions have been highly heterogeneous.convergence, divergence, Russia, regions, growth

An empirical note on growth and convergence across Russian regions

This empirical note uses publicly available Goskomstat data to investigate income growth and convergence across Russian regions. Using data for 1992-2001, we find strong sigma divergence simultaneously with beta convergence. he results indicate that per capita income in Russian regions may be converging towards two separate steady states. The poorest regions seem to be converging among themselves, while growth experiences among other regions have been highly heterogeneous.convergence; divergence; Russia; regions; growth

Risk-taking by Russian banks: Do location, ownership and size matter?

The Russian banking sector has experienced enormous growth rates during the last 6-7 years. The rapid growth of assets has, however, contributed to a decrease in the capital adequacy ratio, thus influencing the ability of banks to cope with risk. Using quarterly data spanning from 1999 to 2007 on all Russian banks, we investigate the relationship between bank characteristics and risk-taking by Russian banks. The analysis of financial ratios reveals that, on average, the risk levels are still below those observed in Central and Eastern Europe. Combining the group-wise comparisons of financial ratios and the results of insolvency risk analysis based on fixed effects vector decomposition, three main conclusions emerge. First, controlling for bank characteristics, large banks have higher insolvency risk than small ones. Second, foreign-owned banks exhibit higher insolvency risk than domestic banks and large state-controlled banks are, unlike other state-controlled banks, more stable. Third, we find that the regional banks engage in significantly more risk-taking than their counterparts in Moscow.bank risk-taking; banks in transition; Russia

Who favors freer markets? The composition and interests of Russia’s regional business lobbies

Why are some lobby groups less benign in their external effects than others? Olson (1982) proposed that those that are less encompassing in the sense that their constituents collectively represent a narrower range of sectors are more apt to seek the types of subsidies, tariffs, tax loopholes and competition-limiting regulations that impose costs on the rest of society. But his hypothesis has to our knowledge not been directly tested. Part of the reason, we suspect, relates to the absence of adequate data. By drawing on a unique pair of surveys, targeted to both business associations (lobby groups) and their constituents, we provide what we believe to be the first direct test of Olson’s hypothesis. Managers from a diverse array of Russian industrial firms and business associations were asked similar questions regarding their attitudes to policies that explicitly benefit well-defined sectoral or regional interests and, implicitly, impose external costs. The pattern of responses is striking. Managers of both the less encompassing associations and the firms that belong to such groups are much more apt to view such policies in a favorable light. More encompassing associations and the members of such organizations are relatively more skeptical of narrowly-targeted government interventions. The results, we believe, provide strong support for Olson’s hypothesis.

Firm behavior under production uncertainty: Evidence from Russia

Enterprises in post-socialist and transition economies often participate in providing infrastructure and social services to the surrounding community. We argue that this bundling of social and infrastructure goods provision with an enterprise’s core operations is a fully rational choice in an uncertain environment. Using a stylized model, we show that this activity can be largely related to efforts by firms to increase their operational reliability. Our unique survey data suggest that this manifests itself through provision of more reliable infrastructure, stronger employee attachment to the firm, and better relations with the authorities.uncertainty; enterprise performance; Russia