Economic diversification and Dutch disease in Russia

Abstract

Despite the impressive economic growth in Russia between 1999 and 2007 there is a fear that Russia may suffer the Dutch disease, which predicts that a country with large natural resource rents may experience de-industrialisation and lower long-term economic growth. This article examines whether there are any symptoms of the Dutch disease in Russia. Using a variety of Rosstat publications and the CHELEM database, we analyse the trends in production, wages and employment in Russian manufacturing industries, and we study the behaviour of Russian imports and exports. We find that, while Russia exhibits some symptoms of the Dutch disease, e.g. the real appreciation of the ruble, the rise in real wages, the decrease in employment in manufacturing industries and the development of the services sector, manufacturing production nonetheless increased, contradicting the theory of the Dutch disease. These trends can be explained by the gains in productivity and the recovery after the disorganisation in the 1990s, by new market opportunities for Russian products in the European Union and in CIS countries, by a growing Chinese demand for some products and by a booming internal market. Finally, investment in many manufacturing industries was largely encouraged, whereas investment in the energy sector was strongly regulated, which contributed to economic diversification.

Is There Convergence of Russia's Regions? Exploring the Empirical Evidence: 1995-2010

“…Finally, the p-values of all tests are not too high to suggest the invalidity of the system-GMM models (Roodman 2009 Becks et al (2007) do not find clear evidence of a decline of the manufacturing sector nor a consistent shift of the labour force from manufacturing to the mining sector through the last two decades. Consistent evidence is found by Dobrynskaya and Turkisch (2010) who also find an increase in manufacturing production, which posits against the existence of the Dutch disease. Overall the Russian industrial potential is still strong and the development of the service sector is driven by the transition process rather than being a Dutch disease symptom.…”

Demystifying Dutch Disease

“…For the second type of studies, see Richards (1994), Oomes and Kalcheva (2007) and Algieri (2011). For the last type, see Dobrynskaya and Turkisch (2010). 25 Measuring precisely the decline in the non-booming tradable sector requires calculating the counterfactual size of the tradable sector, that is, how large the non-booming tradable sector would have been without foreign currency inflows.…”

Long-Term Comparative Advantages of the Eurasian Economic Union Member States in International Trade

“…Coming back to Russia, its current competitive profile in the world economy, predominantly and almost entirely based on natural resources (especially the energy ones), which leads to the so-called "Dutch disease", is the subject of numerous papers [see : Fetisov, 2014;Dobrynskaya, Turkisch, 2010;Ahrend, 2005;Aslund, 2005, etc.]. According to Tabata [2006], who using, amongst others, the RCA method measured how comparative advantages of Russia's major export and import commodities were changing in the years 1994-2005, falling competitiveness in meat, plastics and vehicle production (and growing imports thereof) as well as stagnation in the machinery sectors need to be balanced out by rising competitiveness of Russia's crude and natural gas exports in the first place and, to a lesser degree, those of arms, some base metals, roundwood and fertilizers.…”