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Foreign trade and grain prices in the Russian Empire. For or against the neoclassical theorems of trade?

TERRA ECONOMICUS, , Vol. 14 (no. 3),

This paper deals with the problem of the influence of grain export from the Russian Empire on the domestic price on bread. The counterfactual model of Russian grain marketdevelopmentis proposed, in case if grain export is ceased. The authors refer to a wider range of issues, including not only grain export of Russia in the beginning of the last century, but also to the neo-classical theories of foreign trade. The authors provide analyzes of export’s effects on the balance of payments of the Russian Empire and investmentsstructure and level. In this regard, it is proved that the growth of bread exports negatively affected investments in the manufacturing sector, and in another way in case of falling export of grain. The authors conclude that the export of labour-intensive goods from the country can provoke the outflow of capital in the country specializing in the production of capital-intensive goods, since the export of labour-intensive products reduces the demand for capital. The export of capital from the Russian Empire before the First World War was so significant that the government was forcedto turn to foreign loans. In this regard, the authors have questioned that the positive balance of payments has always positive effect on the national economy. In Russia, grain export had negative consequences in the long term, slowing modernization, however making a positive trend for the country’s agriculture, especially its Southwestern regions. However, the authors believe that increase in grain export had been predetermined by the nature of food consumption in the Russian Empire. In this context, the authors try to draw parallels with the modern situation in the Russian economy in the context of «resource curse».

Keywords: Russian Empire; the grain exports of Russia; economic development; balance of payments; agriculture; the neoclassical theories of foreign trade

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Publisher: Southern Federal University
Founder: Southern Federal University
ISSN: 2073-6606