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TERRA ECONOMICUS

Critical technologies and prospects for Russia’s development under economic and technological restrictions


TERRA ECONOMICUS, , Vol. 22 (no. 2),

The purpose of this article is to examine the reasons of Russia’s lag in technology, and outline the ways to promote the transfer of research into practice in the field of economic and industrial management. We also try to draw possible scenarios for the technological development of the country. Given the current geopolitical situation, the issues of strong science base and production capabilities are of primary concern for Russia, in order to fill the gap in technology and enhance economic stability in the long run. The technological sovereignty of the country, with regard to critical technologies and end-to-end technologies, is one of crucial factors for economic resilience and sustainable development. Promoting specific science and technology projects is suggested, in line with emerging institutional framework for technological development. We argue that currently institutional support for technological development might be provided in two ways: (1) technology transfer from friendly countries, and (2) reliance on domestic basic and applied scientific research as a driver for technological advance. We suppose that such an approach would be favorable for making Russia’s economy more sustainable and technologically sovereign in the long run.
Citation: Аkaev А.А., Devezas T.C., Korablev V.V., Sarygulov A.I. (2024). Critical technologies and prospects for Russia’s development under economic and technological restrictions. Terra Economicus 22(2), 6–21 (in Russian). DOI: 10.18522/2073-6606-2024-22-2-6-21
Acknowledgment: The research was supported by the Ministry of Science and Higher Education of the Russian Federation (Agreement № 075-15-2022-1136 dated 01.07.2022).

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Impact of taxation on economic growth in Russia: The tax buoyancy approach


TERRA ECONOMICUS, , Vol. 22 (no. 2),

The paper analyzes the impact of tax policy in the Russian Federation on investment and economic growth in 2009–2022 by measuring tax buoyancy, which characterizes the percentage change in taxes to the percentage change in the tax base. A tax buoyancy smaller than one would imply tax policy promoting private investment, while a buoyancy of one – public investment. If buoyancy is above one in value, neutral tax policy takes place. We found that withing the analyzed period two stages can be distinguished: (1) 2009–2015, featured by tax buoyancy smaller than one, i.e. tax growth rates lagged GDP growth rates; (2) 2016–2022, when tax buoyancy exceeded one, i.e. tax growth rates outpaced GDP growth rates. Despite significant change in tax buoyancy, no strong effect of taxes on investments in R&D and fixed capital was found. This does not mean that taxes do not matter (counterfactual analysis might prove their significance), but indicates that their impact on investment and economic growth at the macroeconomic level was counterbalanced by another factors, which are of non-tax nature. The second stage (2016–2022) was featured by high tax buoyancy in terms of non-oil and gas revenues, but additional revenues received by the government were not converted into increased business activity. To bring money back to the real sector on a systematic basis and accelerate economic growth, measures should be taken to reduce the effective CIT rate (by reducing the basic nominal rate and/or expanding innovation and investment incentives). In the long term, corporate income tax might be replaced with an alternative tax that is less hindering to economic growth and better amenable to digitalization.
Citation: Bogachov S.V., Vishnevsky V.P. (2024). Impact of taxation on economic growth in Russia: The tax buoyancy approach. Terra Economicus 22(2), 22–38 (in Russian). DOI: 10.18522/2073-6606-2024-22-2-22-38The paper analyzes the impact of tax policy in the Russian Federation on investment and economic growth in 2009–2022 by measuring tax buoyancy, which characterizes the percentage change in taxes to the percentage change in the tax base. A tax buoyancy smaller than one would imply tax policy promoting private investment, while a buoyancy of one – public investment. If buoyancy is above one in value, neutral tax policy takes place. We found that withing the analyzed period two stages can be distinguished: (1) 2009–2015, featured by tax buoyancy smaller than one, i.e. tax growth rates lagged GDP growth rates; (2) 2016–2022, when tax buoyancy exceeded one, i.e. tax growth rates outpaced GDP growth rates. Despite significant change in tax buoyancy, no strong effect of taxes on investments in R&D and fixed capital was found. This does not mean that taxes do not matter (counterfactual analysis might prove their significance), but indicates that their impact on investment and economic growth at the macroeconomic level was counterbalanced by another factors, which are of non-tax nature. The second stage (2016–2022) was featured by high tax buoyancy in terms of non-oil and gas revenues, but additional revenues received by the government were not converted into increased business activity. To bring money back to the real sector on a systematic basis and accelerate economic growth, measures should be taken to reduce the effective CIT rate (by reducing the basic nominal rate and/or expanding innovation and investment incentives). In the long term, corporate income tax might be replaced with an alternative tax that is less hindering to economic growth and better amenable to digitalization.The paper analyzes the impact of tax policy in the Russian Federation on investment and economic growth in 2009–2022 by measuring tax buoyancy, which characterizes the percentage change in taxes to the percentage change in the tax base. A tax buoyancy smaller than one would imply tax policy promoting private investment, while a buoyancy of one – public investment. If buoyancy is above one in value, neutral tax policy takes place. We found that withing the analyzed period two stages can be distinguished: (1) 2009–2015, featured by tax buoyancy smaller than one, i.e. tax growth rates lagged GDP growth rates; (2) 2016–2022, when tax buoyancy exceeded one, i.e. tax growth rates outpaced GDP growth rates. Despite significant change in tax buoyancy, no strong effect of taxes on investments in R&D and fixed capital was found. This does not mean that taxes do not matter (counterfactual analysis might prove their significance), but indicates that their impact on investment and economic growth at the macroeconomic level was counterbalanced by another factors, which are of non-tax nature. The second stage (2016–2022) was featured by high tax buoyancy in terms of non-oil and gas revenues, but additional revenues received by the government were not converted into increased business activity. To bring money back to the real sector on a systematic basis and accelerate economic growth, measures should be taken to reduce the effective CIT rate (by reducing the basic nominal rate and/or expanding innovation and investment incentives). In the long term, corporate income tax might be replaced with an alternative tax that is less hindering to economic growth and better amenable to digitalization.
Acknowledgment: The research is supported by the budgetary funds within the state assignment of the Financial University under the Government of the Russian Federation.

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Determinants of new firm survival across Russian manufacturing industry


TERRA ECONOMICUS, , Vol. 22 (no. 2),

The current situation in the Russian economy brings forth the issue of the successful survival of young companies. I analyze the impact of the initial regional and sectoral conditions on young firms’ prospects for survival. The sample includes more than 27 thousand companies of Russian manufacturing industry emerged in 2017. Given an overall downward trend in the number of liquidated companies per 1,000 operating companies since 2019, high variability between the groups of companies withing the manufacturing industry from 2017 to 2022 is identified, both in terms of absolute values and the dynamics of liquidation. Using the Kaplan– Meier non-parametric estimator of the survival function for a six-year period, I found that manufacturing sectors with a lower share of companies that survive are featured by both a shift in the highest numbers of company liquidations to the earlier periods and higher risk values. The estimates in the Cox regression model indicate a significant and multidirectional impact of institutional, competitive, financial and consumer factors on firm survival, but do not confirm the effect of regional labor markets. In summary, the findings of this study suggest that nowadays, despite the current government policies, the emergence of new firms may be associated with increased survival risk, due to highly uncertain perspectives related to bank loans access, consumer price inflation, as well as the challenges of import substitution.
Citation: Zazdravnykh A.V. (2024). Determinants of new firms survival in Russian manufacturing industry. Terra Economicus 22(2), 39–59 (in Russian). DOI: 10.18522/2073-6606-2024-22-2-39-59

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Human capital and economic development of Russian regions, with special reference to long-term historical dynamics


TERRA ECONOMICUS, , Vol. 22 (no. 2),

Theoretical and empirical studies show that human capital is among crucial determinants of economic development, due to its impact on technological modernization, productivity and economic complexity. Russia’s spatial disparities imply the regional perspective on these phenomena. We aim at estimating the influence of human capital on economic development using the two-step least-squares method. At first step, human capital variable between 2004 and 2019 is taken as a function of (1) a set of historical instrumental variables from late 19th – early 20th centuries and from the middle of the 20th century, as well as (2) a set of historical control variables, such as the level of economic development, economic structure, institutional environment, and technological advance. At second step, we estimate the impact of human capital on GRP per capita averaged for the period 2004–2019. To ensure historical comparability, regional indicators related to the pre-revolutionary borders of the regions of the Russian Empire were converted into indicators corresponding to the regional borders of late 1950s / early 2010s. Besides, the regional convergence model is estimated for the period 1897–2019. The estimates show that higher rate of economic growth is typical for regions with relatively low level of GRP per capita in 1897. Our findings indicate a significant positive impact of higher education on economic development of the regions of the Russian Federation, as well as the validity of historical variables for the regions of the Russian Empire and the RSFSR as instrumental ones. The findings confirm that Russian regions hold great potential for social and economic development through investment in education.
Citation: Bozhechkova A.V., Dzhunkeev U.K., Didenko D.V., Konchakov R.B. (2024). Human capital and economic development of Russian regions, with special reference to long-term historical dynamics. Terra Economicus 22(2), 60–76 (in Russian). DOI: 10.18522/2073-6606-2024-22-2-60-76
Acknowledgment: The research was supported by the Ministry of Science and Higher Education of the Russian Federation (Grant Agreement No.: 075-15-2022-326). The authors express their gratitude to colleagues Ruben Vartanyan, Maria Karpenko, Anna Nifontova for providing the historical data. We would also like to acknowledge the participants of the International academic conference “Economic Aspects of Studying Human Resources in Historical Perspective” (Mirzo Ulugbek National University of Uzbekistan, Tashkent, November 16–17, 2023) and the seminar “Long-Term Historical Dynamics and Factors of Economic Development of Russian Regions” (RANEPA, Moscow, January 25, 2024). Fruitful discussions helped us improve our argumentation. Special thanks go to Maria Karpenko for her assistance in organizing the research. Responsibility for any shortcomings of this paper remains with the co-authors.

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How does the incidence rate affect real income across Russian regions?


TERRA ECONOMICUS, , Vol. 22 (no. 2),

The paper aims at estimating the effect of increase in incidence rate on real income in the regions of the Russian Federation. According to the main research hypothesis, underestimation or overestimation of this effect may occur due to false positive and false negative errors. We apply the method of instrumental variables to improve the accuracy of estimates. Our results show that an increase in the incidence rate in the region by 1% on average results in a decrease in real income by 0,54%, which is three times higher than the estimates obtained from the basic models. We attribute the discrepancy occurred to such factors as reverse causality, missing variables, and peculiarities related to data collection. Practical implications of our research are that the findings might strengthen the arguments for the increased funding of health care programs and support intervention decision making related to effective reduction of morbidity and mortality from various diseases across the regions of the Russian Federation. Our study also contributes to the theoretical literature discussing approaches to assess the relationship between real income and a combination of social and demographic factors at the regional level.
Citation: Nagapetyan A.R., Subbotovsky D.A., Pavlova T.I., Li J. (2024). How does the level of morbidity affect the indicator of real income of the population in the regions of the Russian Federation?Terra Economicus 22(2), 77–95 (in Russian). DOI: 10.18522/2073-6606-2024-22-2-77-95
Acknowledgment: The study was funded by the Ministry of Science and Higher Education of the Russian Federation, project № FZNS-2023-0016 “Sustainable Regional Development: Efficient Economic Mechanisms for Organizing Markets and Entrepreneurial Competencies of the Population under Uncertainty (Balancing Security and Risk)”.

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The American model of global dominance


TERRA ECONOMICUS, , Vol. 22 (no. 2),

The article examines the history of the United States in order to discover its authentic model of global dominance, as well as its meaningful disclosure through the definition of the main elements. The identification of the model relies on historical evidence and stylized facts borrowed from a new book, “America is Against Everyone. Geopolitics, Statehood and the Global Role of the United States: History and Modernity”. As the book suggests, this model is featured by four mental elements: (1) the mythologeme of the God-chosen USA, (2) the doctrine of intransigence towards a political opponent, (3) the stratagem of the totality of political struggle, and (4) the syndrome of rejection of excessive losses. Whereas first three elements are of universal character, being represented in almost every national model of dominance, fourth one is peculiar mainly to the United States only, largely due to the fact that the American statehood is of relatively recent origin. The American model of global dominance, together with its elements, which have been shaped during 200 years, show great stability and inertia. Having projected the peculiarities of the American model of dominance on the current military and political events, a suggestion is made that the U.S. are unlikely to initiate a nuclear warfare in the near-term perspective.
Citation: Balatsky E. (2024). The American model of global dominance. Terra Economicus 22(2), 96–113 (in Russian). DOI: 10.18522/2073-6606-2024-22-2-96-113

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Reception of Mandelbrot and his economic ideas in Russia


TERRA ECONOMICUS, , Vol. 22 (no. 2),

In this article, I analyze the Russian-language academic literature mentioning and discussing Benoit Mandelbrot’s economic ideas. The main findings are that Mandelbrot’s economic ideas about the fractal nature of markets have a limited popularity among Russian-speaking scholars. The peak was reached in the middle of the 2010s, and now every year we see a smaller number of publications mentioning him. He stays more recognized in the field of mathematics and geometry, compared to economics. However, in the works of Russian-speaking scholars mentioning Mandelbrot we can see that his ideas were met with quite a positive attitude. His novelty and originality are recognized. The reception of fractal theory in economics varies from being the only working strategy for building an adequate model of the market and predicting financial collapses to not having many benefits in comparison to the classical probabilistic theory. Nevertheless, evidence shows that markets have fractal (not random) nature, and new works support that idea. Some scholars regret the undeserved unpopularity of fractal theory, while others explain it by its incompleteness and complexity, which limits the wide practical usage of Mandelbrot’s ideas. Despite all limitations, the fractal theory definitely has its own place in economics and finance. Probably the main significance of Mandelbrot’s theory is not in its practical tools, but in the general philosophic idea.
Citation: Negina Y. (2024). Reception of Mandelbrot and his economic ideas in Russia. Terra Economicus 22(2), 114–123. DOI: 10.18522/2073-6606-2024-22-2-114-123

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Diplomats on BRICS: Drawbacks and benefits of cooperation without integration


TERRA ECONOMICUS, , Vol. 22 (no. 2),

BRICS, a geopolitical project-type organization, has become the object of heightened research interest by some, sceptical controversy/dismissal by others and tacit neglect by most in mainstream academic studies. Disagreements range significantly from its ability to remain united in the absence of meaningful commitments to integration, to its real capacity to wield behavior-transforming power on the international stage and stand up to a unipolar American-led world. Its five historic members – Brazil, Russia, India, China and South Africa – recently joined by Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates, have come a long way in their cooperation since the first summits were held in the 2000s and have even embarked on a semblance of institutionalization process with the creation of the New Development Bank which allows the countries to support each other by circumventing both the US dollar and the Western financial system. The future of BRICS remains, however, indeterminate, with few studies making sense of the perceptions of its members’ leaders and the challenges they face on a daily basis in maintaining this apparently disparate format. The present qualitative study is based on 21 anonymous expert interviews with diplomats from BRICS countries in which they reveal the true mechanisms at work in the bloc and the way in which a basic set of values concerning international interaction glues the organization together. The findings show that integration is not a condition sine qua non for successful, long-term cooperation. By refusing to give up on anything they value (particularly sovereignty) and by avoiding open confrontation, BRICS members have been able to creatively establish a platform for cooperation that allows them to successfully accomplish a number of their foreign policy and economic goals on their own terms without compromising their pledge on sovereignty and perceived autonomy of foreign policy action.
Citation: Crowley-Vigneau A., Baykov A., Gao A. (2024). Diplomats on BRICS: Drawbacks and benefits of cooperation without integration. Terra Economicus 22(2), 124–137. DOI: 10.18522/2073-6606-2024-22-2-124-137
Acknowledgment: We thank Yelena Kalyuzhnova for her inspiring supervision of our work.

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How likely was to fall into unemployment during the COVID-19 pandemic crisis in Ecuador?


TERRA ECONOMICUS, , Vol. 22 (no. 2),

The COVID-19 pandemic did not only impact on the health system but also the economic one, reducing the employment. This research aims to determine the influence of socioeconomic factors on the probability of falling into unemployment in the context of the COVID-19 pandemic. To do so, a survey on the economic and financial situation of people in Ecuador, carried out by the National Polytechnic School in May 2020 is used. The results of the probit model estimation indicate that characteristics of people who were more prone to lose their jobs during the economic crisis derived from the COVID-19 pandemic are: women with no education; people older than 45 years old; people with no insurance; people with no savings, people with informal debts and people working in COVID-19 related high-risk activities. A novel result that adds to the existent literature is that women and men with no education (same condition) are not equally prone to lose their jobs; women with no education are more likely to lose their jobs than men with no education.
Citation: Guevara-Rosero G.C., Jachero D., Guachamín M. (2024). How likely was to fall into unemployment during the COVID-19 pandemic crisis in Ecuador? Terra Economicus 22(2), 138–151. DOI: 10.18522/2073-6606-2024-22-2-138-151
Acknowledgment: The authors acknowledge the research team at Escuela Politécnica Nacional that conducted the survey.

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