Natural Resources and Economic Growth in Russia's Regions

Abstract

We examine the impact of natural resources on economic growth in Russia’s regions since the introduction of the mineral tax in 2002. Using novel measures of natural resource rents produced in, but not necessarily appropriated by the regions (mineral tax collections), we demonstrate that mineral wealth has not significantly affected regional economic growth since 2002, although mineral-rich regions are significantly richer than the other regions. These results are contrary to the “resource curse” hypothesis. The absence of growth benefits to resource-endowed regions, however, is also at odds with the clearly beneficial impact of natural resources on the economic growth of the country as a whole. We conclude that the Russian central government was successful in taxing away incremental regional resource rents during 2002-2011, but the regions preserved their pre-2002 benefits derived from mineral wealth.

Keywords: natural resources, regional growth, taxation of minerals

JEL Classification: P28, R11, Q38