Working Paper: CEPR ID: DP5265
Authors: Goohoon Kwon; 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 labour 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 auto-regression, drawing on extensive and unique regional data covering the last decade. We find that labour mobility associated with regional shocks is far lower than in the US 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.
Keywords: fiscal policy; labour mobility; panel VAR; Russia
JEL Codes: C33; E62; H77; J61; P52
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| regional income shocks (R11) | regional income volatility (R11) |
| regional income shocks (R11) | labor mobility in response to regional income shocks (J69) |
| regional fiscal policies (H70) | regional income volatility (R11) |
| federal transfers (H77) | regional economic stability (R11) |