Regional Growth in Russia During the 1990s—What Role Did FDI Play?

Abstract

Regional economic growth in Russia's regions in 1995-2000 is analysed with particular attention paid to FDI and how it influenced growth during this period. FDI appears to have been essential before the 1998 crisis in helping the economy grow despite the initial chaos of the transition. Larger regional economies that have garnered most FDI and perhaps gone further with institutional reforms that can assist in capturing the full benefits of FDI are likely to lead economic growth in the future. All regions need to take advantage now of the favourable economic environment to assess and learn from prior FDI experience to foster future growth should the price of oil and the remaining advantage of a depreciated currency change. No evidence was found that region-wide corruption hindered economic growth in the 1990s.

Foreign direct investment and regional economic development in Russia: an econometric assessment

“…Considering that the previous regional-level studies, including Ahrend (2005Ahrend ( , 2008, Brock (2005), and Ledyaeva and Linden (2008), were not successful in detecting a statistically significant effect of FDI in their baseline estimations, we think that it is a useful empirical strategy to extend the observation period more broadly to include the years after 2003 from the viewpoint of increasing the amount of information and our arguments as described in Section 2.…”

“…In addition, several studies of the CEE economies have examined the relationship between the productivity-enhancing effect of FDI and the absorptive capability of the recipient country, and their empirical results are far from consistent (Campos and Kinoshita, 2002;Altomonte and Pennings, 2009;Bijsterbosch and Kolasa, 2010;Nicolini and Resmini, 2010;Damijan et al, 2013;Neycheva, 2013). Moreover, with regard to Russia, as mentioned in Table 4, Brock (2005) has estimated the interaction term of the percentage of change in the cumulative amount of FDI to GRP relative to the prior year and the number of secondary school students per 10,000 residents in order to test a possible synergistic effect between FDI and human capital. However, his empirical results have failed to support the absorptive capacity hypothesis, as the regression coefficients are insignificant in the baseline 11 Although the estimates of the control variables are not reported in Table 7, they are not so different from those in the baseline estimation.…”

“…Moreover, most studies focusing on the Russia regions, including Ahrend (2005), Brock (2005, and Ledyaeva and Linden (2008), found a significant effect of FDI only after imposing certain restrictions on the estimation period or the regions to be analyzed. On the other hand, many microeconomic studies, represented by Brown and Earle (2000) and Yudaeva et al (2003), could verify the effects of foreign ownership and productivity spillovers from foreign companies to domestic firms.…”

“…Therefore, in this paper, we approach this issue by empirically testing the effect of FDI on the total factor productivity (TFP) of the constituent entities of the Russian Federation. Ahrend (2005Ahrend ( , 2008, Brock (2005), and Ledyaeva and Linden (2008) represent major earlier studies in this field. As we will report later, however, none has successfully verified a statistically significant effect of FDI in the Russian regions in their baseline estimations.…”

Financial analysis of foreign direct investment on economic growth of developing countries

“…However, the positive correlation does not confirm that high FDI and GDI rates result in heightened inflow or vice versa. Brock (2005) examined the influence of FDI on regional economic growth. He emphasized the limited effect of FDI on the growth of domestic companies due to limited reforms of institutions, judicial reforms, etc.…”