Analysis of differentiation of socio-economic development of the Russian regions
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The typology of the regions of Russia, the analysis of their differentiation by various indicators of socio-economic development has become a key direction of research in fast developing Russian regional economy. The same term "region" can be applied to the socio-economic systems which are completely/absolutely incomparable by scales of activity, direction of development, political orientation, therefore construction of the typology serves as the starting point, and a prerequisite for analyzing regional economic systems.
The study of region differentiation in Russia necessitates, first of all, selection of the factors - determinants defining the specifics of the socio-economic situation of a region. It should be emphasized that the local governments ( at regional, and at urban and municipal levels) embarked on working out plans and programs of economic development during the post-soviet period only. As a matter of fact there were no traditions, skills or experience in this field. Under the Soviet Union local governments were part of the centralized political and economic system. At that time local governments completely depended on the central ministries and the enterprises subordinated to the center and Communist Party structures. The economic development at a regional level was determined by the volume of subsidies, transfer payments, and financial help of the central government. The central soviet ministries could act/behave as multinational corporations, as they did not pay due attention to the administrative division of the regions. They were in a position to redistribute investment resources between the enterprises subordinate to them regardless of their geographical locations.
The responsibilities of local governments were limited to providing a socio-economic infrastructure in accordance with the norms and standards established by the center. Public health services, education, culture, housing and public utilities were all financed locally. Thus, when studying differentiation between the regions it should be noted that from the outset the disproportions of the economic development levels were exogenous factors. Due to the considerable gap under the transitional period the influence of regional governments on these disproportions could be rather limited
As such, the issue of elaborating the socio-economic typology of the regions could also be resolved under the planned economy, but at that time attention was focused on the formation of the social policy in the regions. A basic idea declared officially was to realign the levels of socio-economic development in the regions, and accordingly decisions were made to create welfare facilities in the depressed regions. The 1980s witnessed a steady fall in the interregional differentials in terms of nominal per capita incomes. The dispersion of regional deviations of the nominal incomes per capita went down from 35 % in 1980 to 32 % in 1985, and 30 % in 1990. Nevertheless, even under this policy in the Soviet period it was not always possible to iron out the growing social disproportions between the regions. Thus, in 1970 - 1990 the gap was broadening in housing accommodation per city dweller between the regions of Siberia and the Far East, on the one hand, and the central (European) part of the country, on the other. Significant imbalance also persisted in public health and educational services.
Thus, the region typology by social component appears to be one of the tools to study the interregional differentiation issues, highly appropriate to the tasks and functions, which were traditionally the domain of regional (local) governments. As a whole the elaboration of the appropriate typology is a precondition for an effective adaptation to local conditions of the social policy designed at a federal level, (pension policy, programs of employment of the population, housing programs, federal standards in field of public health services, education, social protection of the population).
Selecting a set indicators for building a typology of socio-economic situation in the regions, which is aimed at choosing the methods of social policy implementation is a difficult objective. Thus, for instance, in 1999 S.N. Smirnov suggested the following set of indicators: the population growth, the balance of migration, the rate of registered unemployment, the mis-match rateof the labor market, the average duration of unemployment, the ratio between the average salary and the cost of living, and the volume of newly built housing accommodation (per one dweller). In accordance with the typology thus obtained all subjects of the Federation are broken into four groups - from the regions with rather favorable social conditions to the regions in a critical situation.
The publications of Russian research centers range the subjects of the Federation by the following indicators: living standards, the purchasing power of salaries, wages, and incomes, the ratio between the incomes, salaries, wages, and pension on the one hand, and the cost of living, on the other, the share of the population with incomes lower than living costs, the degree of population differentiation by income etc. (All-Russia Center for Living Standards under the Ministry of Labor, 1998). In this particular case the study of differentiation is carried out on the basis of individual indicators, and it is not aimed at building a typology.
It should be noted that a promising direction to study regional differentiation of living standards is not only broadening the number of indicators, but also an improvement of the multidimensional statistical analysis used for typology of the regions by sets of social indicators. The situation of the needy population and the living standards in a region depend on quite a few parameters, which are not regularly recorded in the statistical data, such as worsening operation of the public transport, poorer quality of utilities (water-supply, heating), narrowing of the "obligatory" range of services of free public health services and education etc. One of the directions of research may become the study of processes of social exclusion, the analysis of the deprivation index and other indicators, more fully describing socio-economic situation, and the position of vulnerable groups of the population. At the same time, tackling a number of social policy issues at a federal level (for example, the formation of income policy) requires elaboration of special versions of regional typology. The studies already completed show that the typology based on the purchasing power of the population, the level of their differentiation, the rate of poverty and its acuteness, and the rate of general unemployment turns out to be rather informative.
The problem of analyzing the differentiation in the economic position of the regions (unlike their differentiation by social indicators) became important/topical during the post-soviet period only, after local governments had an opportunity to actively influence the processes of the economic development at a regional level. The economic crisis in Russia is not that of a system, but that of a structure, and because of that it brought about further differentiation and growing disproportion in the economic development. The regions with a fuel and commodity basis, with export-oriented industry, with a developed infrastructure and financial system have appeared to be in a more privileged position. On the contrary, the regions with a significant agrarian sector, light and food-processing industry have fared worse.
The basic objective factors of interregional differentiation can be the following:
• economic and geographical situation of regions;
• natural and climatic conditions;
• demographic situation;
• pattern and specialization of the branches of the economy;
• financial security.
The estimates based on the official statistical data obtained within the framework of the of the World Bank project - " Bureau of Economic Analysis " demonstrate, that the concentration factor of various macro-indicators (Gini Index) calculated for the regions of Russia in accordance with the 1994-1997 data, steadily grew, which confirms the rise in differentiation of economic development of regions. The corresponding factor for the manufacturing output per capita has grown for the same period from 0.319 to 0.359; for the purchasing power indicator - the ratio between the money incomes and the cost of living - from 0.11 to 0.14; for the fixed capital investments per capita - from 0.277 up to 0.330, and for the foreign investments per capita - from 0.702 up to 0.828. As regards the last indicator it is worth remembering that at the unit value of the Gini Index all foreign investments are localized at one point, which apparently takes place in Moscow if the official statistics to be trusted (that is, the analysis of the distribution row proper by this characteristic makes no sense).
Rather indicative proves to be also the calculation of fund factor which in statistics is understood as the ratio of average values of indicator for 10 % of the territories-leaders and territories -outsiders. Thus, by the level of the gross regional product per capita the gap amounts to 6.2 times, by the volume of industrial output - 17 times, by the investments in a fixed assets per capita - 8.5 times. With the polarization of economic development like this, it is evident that the possibilities of regions to adapt to economic crises and to stabilize social conditions are completely different.
It is also of interest to compare the results of typology by social criterion listed above, and the "rectilinear" ranging built on the basis of the indicator of the gross regional product per capita. Only the first seven territories-leaders appear in the group of regions with rather favorable social conditions (Moscow, Tyumenskaya , Republic Sakha, Samarskaya , Republic Tatarstan, St.-Petersburg, and Kemerovskaya ). Kamchatskaya , Krasnoyarskiy krai, and Sverdlovskaya ranked from 9 to 11th place by economic rating) get in the second group - with moderately acute social conditions, and Permskaya - in a group with rather adverse social conditions. On the other hand, all territories-outsiders of economic development (the Caucasian republics, Tambovskaya, Ivanovskaya,and Kurganskaya s, Republic Tyva and Kalmykia) belong to a "crisis" group by "social" typology as well. This proves, firstly, that it is necessary to use multi criteria algorithms of the typology (clusterization) of regions, and, secondly, it proves the hypothesis about the absence of direct links between macroeconomic indicators (in terms of region), and the"local" economic development proper and social conditions in the region.
The regions-leaders (by GRP rate per capita) are predominantly industrial regions with a high manufacturing potential, high-tech industries, sufficiently diversified production, they also possess a fuel and raw material export potential, and are favorably situated in border regions. The most developed regions are located all over Russia, and are not no rigidly tied to any particular economic region. On the contrary, the least developed regions are rather strongly linked to certain economic regions.
The regions-leaders (the first 11 s) account for 40 % of the gross domestic product of the Russian Federation and attract about 80 % of all foreign investments.
Around 40 % of large and medium-size enterprises of Russia are concentrated there. Their profit amounts to about 60 % of all profit in Russia.
The application of the gross regional product as an indicator suggests a methodological improvement of its calculations and elaboration of the accounting system of regional economic activity within the system of national accounts (SNA). When applying this indicator at a region level, it is necessary to study the theoretical and methodological aspects of the interrelations between the GRP , the output per capita, and the standard of well-being.
For the majority of countries with a federal government rule the availability of the system of regional economic accounts compatible with the system of national accounts , is vitally important. As a rule, regional economic accounts are part of the SNA. Today the SNA is a unique, well-grounded, and universally recognized tool of the macroeconomic analysis of both the real and regional economy.
The gross regional product is the central indicator of regional accounts. In Russia this indicator (gross regional product, GRP ) is recommended for calculations by the State Statistical Committee, however it is calculated only at the level of the subjects of the Russian Federation. The methodological basis for calculations is under elaboration. The RF State Statistical Committee (a federal agency) did not issue official recommendations for elaborating the system of regional economic accounts or for their composition.
Currently, systems of regional accounts are being developed within a number of the SNAs, first of all in the USA, Canada, and the countries of the European Union.
In Canada regular GDP are calculated by province on the basis of regional (provincial) systems of economic accounts (for example, Ontario Есоnomic Ассоunts, 1998, The British Columbia..., 1997]). The province indicator is referred to as " a Gross Internal Product " and, as follows from the methodology of its calculation, [The British Columbia..., 1997], it includes all GDP components of the country and is calculated not only by industrial method, but also by the incomes and costs. In the Canadian regional statistics the province GDP is the main resulting indicator which consolidates various regional accounts.
The most complete description of the regional accounts standard is presented in Е5А 1995 - the system of national accounts of the European Union. A separate chapter is devoted to this subject in a Е5А 1995 manual [European System of Accounts..., 1996]. The standard of the European Union introduces several basic concepts, - a regional territory, institutional units, and a regional residence.
Obviously, the study of regional distinctions of Russia's economic development can not be undertaken on the basis of one resulting indicator (GRP ) only, especially at the level of the RF subjects. The actual distinctions can be calculated as a result of the analysis of economic process by region which can be described by the system of regional economic accounts.
It is suggested on the basis of the available experience of a number of countries:
1) to elaborate recommendations for creating the system of regional economic accounts;
2) to construct on the basis of the available data, and evaluate as an experiment the economic accounts of region sample;
3) to suggest the methodology of the analysis of regional pattern of economy based on regional accounts which are built in the system of national accounts.
The elaboration of economic regional accounts makes it possible:
to connect together production and incomes and costs formation for all sectors of the regional economy;
to define the effect of distinctions under conditions of development on specialization of regional economies;
to assess the influence of macroeconomic processes on formation of rates and proportions of the regional development in Russia.
A more complex method of the analysis of region differentiation (clusterization) is based on a selected system of key indicators which reflect the general macroeconomic situation in the region, the state of the real sector, and the budget and financial systems. Since the scheme and methodology are designed for the comparative analysis, they use comparable or normalized indicators. A list of indicators used for multidimensional classification within the framework of research of the regional analysis for the project "Economic Analysis Bureau" is provided in Box 1:
System of indicators for constructing the region typology
Macro indicators and the real sector:
1) GRP / per capita (thousand roubles)
2) Industrial output / per capita (thousand roubles)
3) Agricultural output / per capita (thousand roubles)
4) Share of the urban population of the total population (in per cent)
5) Fixed capital investment / per capita (thousand roubles)
6) Foreign investments / per capita (US dollars)
7) Volume of export / per capita (thousand roubles)
8) Retail turnover / per capita (thousand roubles)
9) Consumer price index (as per cent December / December of the corresponding year)
10) Money incomes / per capita (thousand roubles)
11) Purchasing power of the money incomes (in per cent)
12) General unemployment rate (in per cent)
13) Poverty rate (in per cent)
Financial and budget systems:
14) Ratio between the budget deficit and GRP (in per cent)
15) Tax receipts share of the budget revenues (in per cent)
16) Ratio between profit margin by the basic types of economic activity and GRP (in per cent)
17) Share of the unprofitable enterprises (in per cent)
18) Ratio between share of overdue accounts payable and GRP (in per cent)
19) Number of functioning credit organizations per 10 000 enterprises
20) Ratio between the share of credit investments and GRP (in per cent)
21) Ratio between the share of overdue debt repayment and the total loans (in per cent)
22) Ratio between the share of enterprises current and settlement accounts and GRP (in per cent)
23) Ratio between the population deposits and GRP (in per cent)
24) Currency purchase / per capita (thousand roubles)
25) Currency sale / per capita (thousand roubles)
The suggested set of indicators shows a certain "shift" in the direction of financial, and budgetary and credit indicators. On the contrary, the system of macroeconomic indicators takes into account only four social indicators which taken together do not produce a complete picture of the nature of social development of a territory. At the same time, the conducted study is of interest as it represents the only precise attempt of the methodology, we know of, to carry out clusterization by using up-to-date mathematical and statistical techniques.
The results of the typology by two sets of criteria (economic, and financial and budgetary) are presented below:
Rich regions with a strong financial system
Rich regions with a satisfactory financial system
Average regions with a strong financial system
Average regions with positive potential of economic development
Average regions with negative potential of economic development
Average regions with a critical financial system
Poor regions with a satisfactory financial system
Poor regions with an unsatisfactory financial system
Kurganskaya Republic Buryatiya Republic Tyva
As compared with a "one-dimensional" classification, the composition of the regions-leaders practically does not vary (Surprisingly, Vologodskaya was included in the first group, as the typology does not take into account the intra-regional differentiation of economic development and living standards .
Vologodskaya is one of the few territories, in which its capital city - Vologda is depressed along with the entire agrarian part of the , and because of the Cherepovetskiy industrial center the macroeconomic indicators are corrected, which accounts for somewhat unexpected results of the classification.
We think that the clusterization method analysis makes it a very promising technique to be applied to the coordinated study of the processes of economic and social development of territories. At the same time, the enlargement of the number of statistical indicators should be accompanied by increased requirements to the substantial analysis of the results, as the excessive formalization of the method may result in obtaining typological breakdown, which are difficult to interpret.
The analysis of the regional financial potential and its financial flows may become a promising direction of the study of interregional differentiation. The method of financial flow matrices - SAM (social accounting matrix) can be successfully applied as a tool of the analysis. The convenience of this technique is that it is compatible with the standard SNA UN 1993. In a simplified form it can replace regional current and accumulation accounts. This method may also help in to evaluate the relationship between the residents of this region and " the rest of the world ", which permits to approach constructing the balance of external payments (the "balance of payments") of the region.
It also permits to evaluate the rates of accumulation and sources of investment formation in the regions, and attractiveness of a given region for capital flows.
The estimation of the process of formation and position of financial potential of a region is important for a fiscal policy, and for the study of the aggregate/cumulative potential of regional economic development. The basic indicators defining the finances of governments at different territorial levels, the finances of enterprises and households, their formation and use are published, for example, in Canada quarterly [for example, Economic and Fiscal..., 1994]. This information forms the basis for regional planning, while the indicators of incomes and value of the accumulated property are considered as the target figures.
The comparisons of regional distinctions in financial potentials will allow to define and to explain the conditions of regional economic development and the character of their interrelationship.
Finally, let us consider some issues of the differentiation analysis of the regions by type of compensatory tools used by them for adaptation to new economic conditions. These tools can be divided into favorable and unfavorable. The unfavorable tools include: the change in migration flows, the naturalization of consumption, the "shadow" employment, the development of new sectors of the economy, the interbranch redistribution of the economic burden, the inflow of investments, and the re-structuring of production (the Expert Institute, Report on the project ТАСIS BIS 95/321/057)
The federal regional policy and local authorities' socio-economic policy can be referred to as favorable compensatory tools. Leaving aside the issues of the interbudgetary relations, we may note that such measures as the introduction of tax benefits under the federal taxes, subsidizing the transport and energy tariffs for the regions of the Far East and Zabaikalya, the allocation of subsidies to the coal-mining regions and elaboration and partial implementation of the development programs of some depressed regions of the central Russia, the Far East, Pskovskaya , Buryatiya etc can be regarded as the methods of regional policy. The importance of these supportive methods used by the federal government, was devaluated because of the lack of resources, and poor coordination of the programs with the budget planning.
The elaboration of the methodological principles of macroeconomic policy at a regional level was to great extent hindered because local authorities enjoyed a special status in obtaining the state subsidies, preferential loans, import subsidies, in maintaining low prices for certain industrial commodities and essential consumer goods, and in getting some other non-market financial transfers. All this made it difficult to carry out structural reforms, it also weakened budget restrictions.
An energetic regional policy to restructure and diversify economic activity of the subjects of the Federation would allow to weaken the influence of negative trends. However, extremely slow adjustment of local authorities, and businessmen alike, to the changes in economic market conditions, to the situation on the commodity, capital and labor markets, the absence of satisfactory investment strategy, - were the factors impeding the economic growth and restructuring of regional economies. To some extent it can be also justified by the fact that the production capacities that emerged, labor resources, and the state of fixed assets of the regions, unless they are supported by strong investments, not provided with essential investment support the de facto structures of capacities, labor forces and condition of fixed capital of the regions are doomed to failure to reproduce the only obsolete proportions.
Early in the 1990s another method of federal regional policy was used - creation of free economy zones (FEZ ) of various types - from free customs areas to comprehensive zones. The FEZ were to have been located in the center of large economic regions, seaports, and railway junctions which had convenient transport links with the internal regions of country, and with the outer world. In other cases the FEZ were officially planned to be created in the midth of Russia, in regions having no access to industrial and transport centers, in order to speed up tackling the issues of socio-economic development of the regions and to draw in additional raw materials resources, to increase the output of competitive products, and to attract foreign investments. "Altai" (in Altaysky krai), "Dauria" (in Chitinskaya ), and "Eva" (in Jewish autonomous ) are the examples of those zones. Although the radical economic changes inside the country have, in fact, put an end to the establishment of the officially planned and declared FEZs , at present there are still 18 of them in Russia, at least officially. If earlier FEZ were looked upon as the integration channels into the global economy, now the regional executives see them as a means of setting the regions apart from the federal authorities for obtaining customs, tax, financial, and other business and administrative privileges/benefits. We think, however, that the elaboration of appropriate tools to make federal regional policy support FEZ will retain its importance in the future, particularly for some border areas, the Kaliningradsky , and some regions in the Northwest.
A list of publications (Current references)
1. S.N.Smirnov. "Regional aspects of social policy". M.: Gelios АRV, 1999.
2. Monitoring "Living standards and incomes of the population ". M.:вцуж, 1997-1999.
3. Expert Institute. The report on the project BISTRO BIS 95/321/057. Moscow, 1996
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Article description: The typology of the regions of Russia, the analysis of their differentiation by various indicators of socio-economic development has become a key direction of research in fast developing Russian regional economy.