Abstract

In this paper we estimate the impact of changes in the structure of general government expenditure on GDP growth rate in Russia. We construct two types of models: with expenses as shares of total general government spending and as percentages of GDP. The structural vector autoregression (SVAR) methodology from [Corsetti et al., 2012] has been used. According to our estimates, an increase in the share of productive expenditures (national economy, education and health) has a positive impact on the rate of economic growth, while an increase of the share of non-productive expenditures (national defense and social policy) has a negative effect on the growth rate of GDP.

The largest positive effect among productive expenditures belongs to expenditure on the national economy: increasing spending on the national economy by 1% of GDP while maintaining the total expenditure unchanged leads to an increase in GDP growth rate by 1.1 p.p. The second largest effect is produced by expenditure on education: a 1% of GDP increase in this expenditure with constant total spending leads to additional GDP growth of 0.8 p.p. Expenditure on health care has the least positive impact on growth: the effect of its increase is estimated at +0.1 p.p. to GDP growth rate. For defense and social spending the effect is negative: -2.1 p.p. and -0.7 p.p. respectively. The results obtained in this paper are generally consistent with the results in previous empirical studies for Russia based on fiscal multipliers, as well as results in empirical studies with foreign and international data.

Keywords: public expenditure, expenditure structure, productive expenditure, economic, growth, econometric model.

JEL: C51, C52, H50, H59.

Alexey I. Balaev, Cand. Sci. (Phys. and Math.). Economic Expert Group (5/4, Vetoshny per., Moscow, 109012, Russian Federation); Financial Research Institute (str. 2, 3, Nastasyinskiy per., Moscow, 127006, Russian Federation).

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Abstract

Tax evasion is facilitated by corruption, and corruption is facilitated by tax complexity. This article argues and presents evidence that tax systems have become far more complex than they need to be. The growth of public sector operations over the past century was accompanied by higher and more complex taxes, higher public spending, many new government programs, and an increasing involvement by governments in the functioning of the countries’ economies and in the activities of citizens. It has created a great deal of complexity in public sectors, and a fertile field for corruption, tax evasion or tax avoidance, and abuses in some government programs. The more governments relied on tax systems to pursue an increasing number of social and economic objectives, the more complex the tax systems became and the greater were the opportunities created for some taxpayers to get around the system. Complexity also encourages the growing army of lobbyists to push for small tax changes advantageous to their clients, causing tax systems to become increasingly more complex. In addition, it increases the costs of administering tax systems and of complying with the many tax obligations. To what extent tax systems have become fertile for corruption and tax evasion is likely to depend on cultural characteristics of countries among other factors. Globalization has opened new doors and new opportunities for individuals and corporations who operate, or can operate, globally to exploit the new tax-avoiding possibilities created by globalization and a global financial system. Nevertheless, complexity is not inevitable. It could, however, be reduced, as the experience of some countries has shown.

Keywords: corruption, complexity, evasion, simplicity, revenue losses, equity, development.

JEL: D73, H20, H26.

Vito Tanzi, Honorary President, International Institute of Public Finance (Poschinger str. 5, 81679 Munich, Germany).

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Abstract

Government programs in the Russian Federation are often the subject of strong criticism, especially due to the obvious significant shortcomings in the methodologies used for their evaluation. The reasons for those shortcomings are numerous. Executives in charge of both federal and regional level government programs are sometimes provided with excessive authority for the selection of evaluation methods, and the assessment of target vs. planned indicator values can be statistically unreliable. The criteria for program management assessment are rather perfunctory compared with international practice, which involves meaningful management result evaluation. The algorithms used to calculate efficiency indicators often lead to logical contradictions. Recommendations are given on streamlining assessment methodologies of state program execution, the key ones being: (a) feasibility substantiation and application of the modified Program Assessment Rating Tool (PART) method for assessing the degree of meeting the program’s goals, based on three individual ranking scores which take into account the advisability of pursuing the program, the quality of the program’s management and the program’s final results; (b) method of assessing the program output based on an algorithm which takes account of any inequivalence of subprograms’ target indicators, subprograms themselves and the main target indicators of the state program; (c) method of program performance assessment for a specific calendar year, based on the adjustment of integral evaluation of the program’s output with regard to the correlation between the real and projected amounts of its financing and the dynamics of changes in efficiency assessment rankings for the whole assessment period.

Keywords: government program, target indicators, modified PART methodology.

JEL: H43, O21, O22.

Andrey M. Margolin, Dr. Sci. (Econ.), Professor. Russian Presidential Academy of National Economy and Public Administration (82, Vernadskogo pr., Moscow, 119571, Russian Federation).

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Abstract

Trade volume growth in 2017, the strongest since 2011, was driven mainly by cyclical factors, particularly increased investment and consumption expenditure. The WTO is forecasting that global trade will expand in the coming years. The promising situation in international trade largely depends on the sustainability of global economic growth and the decisions of the largest countries’ governments regarding monetary, fiscal and especially trade policies. High uncertainty is associated with the implementation of negative scenarios in the event that some countries will apply protectionist measures and restrictive trade policy. Rising protectionism is a trend that has been strengthening in international trade for more than ten years. A new wave of protectionism was linked to the global financial and economic crisis. The recent steps taken by the United States administration to decrease trade deficit with the key partners, China in particular, are the most vivid example in this respect. Protectionism is reflected not only in the form of the introduction of tariff restrictions. Since the beginning of the 2000s, the role of non-tariff measures has grown significantly in the context of reducing tariff barriers

in accordance with the WTO obligations and the rapid development of regional trade agreements. This article analyzes the dynamics and structure of non-tariff measures used in modern international trade and shows their relationship with the reduction of tariff restrictions and the development of preferential trade agreements. A similar analysis is done on the anti-dumping measures as one of the most common instruments of non-tariff regulation of international trade.

Keywords: WTO, protectionism, non-tariff measures, anti-dumping measures, regional (preferential) trade agreements.

JEL: F02, F13, F15, F18.

Pavel A. Kadochnikov, Cand. Sci. (Econ.). Russian Foreign Trade Academy (4a, Pudovkina ul., Moscow, 119285, Russian Federation).

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Tatiana A. Flegontova. Russian APEC Study Center, Russian Presidential Academy of National Economy and Public Administration (11, Prechistenskaya nab., Moscow, 119034, Russian Federation); Russian Foreign Trade Academy (4a, Pudovkina ul., Moscow, 119285, Russian Federation).

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Timur M. Aliev, Cand. Sci. (Econ.). Russian APEC Study Center, Russian Presidential Academy of National Economy and Public Administration (11, Pre chistenskaya nab., Moscow, 119034, Russian Federation); Russian Foreign Trade Academy (4a, Pudovkina ul., Moscow, 119285, Russian Federation).

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Abstract

The article examines the relationship between import of semi-finished products and export of final goods of Russian manufacturing firms. The key question is whether the import of components and semi-finished products affects the competitiveness of the final product. We argue that the competitiveness of exporters largely depends on endogenous factors and, in particular, on imports of semi-finished products, components and means of production, and thus consider only exporting firms instead of the total population of manufacturing firms. We employ the data from the RuFIGE project for manufacturing firms in Russia in 2014. The empirical estimation uses probit regression. Empirical results show that import of advanced components increases the quality of produced goods, which, in turn, determines higher competitiveness of a firm on foreign markets: a higher share of imported components and semi-finished goods is related to a higher share of export revenue and a higher probability of a given firm being an exporter of advanced goods. We also find that a higher share of imported means of production (within the total investments in means of production) increases firm production capabilities and this, in turn, determines higher export revenue. The results have an important consequence for Russian economic policy and indicate that the introduction of protectionist measures on import of foreign components and semi-finished goods should occur, first, gradually, to allow companies to adapt to the new conditions, and second, selectively, in order not to block the access of Russian exporters to critical components and means of production that have no Russian analogues.

Keywords: export, import, competitiveness of firms, Russian economy.

JEL: F14, D22.

Yuliya V. Averyanova. National Research University Higher School of Economics (3A, Kantemirovskaya ul., Saint Petersburg, 194100, Russian Federation).

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Abstract

Cryptocurrency is a brand new civil law object and its legal framework is in a formative stage. As of early December 2018, no federal law regulating activities with cryptocurrencies is enacted in Russia. Nevertheless, cryptocurrency issues have already appeared in court cases, in particular in connection with defense of creditors’ rights. An emblematic case in this respect is the recent personal bankruptcy trial of Ilia Tsarkov, which was held at the Moscow Arbitrazh Court. The bankruptcy trustee requested to include the bitcoins in possession of the debtor in the bankruptcy estate. The debtor objected to this, his key argument being that legal relations concerning cryptocurrencies (or bitcoins) were not regulated by Russian legislation and even the concept itself was not mentioned in any statute; thus bitcoins could not be legally treated as property. However, the second-instance court agreed with the trustee’s arguments and annulled the first-instance court ruling. The main argument was that, if principles of the Russian civil law were applied properly, then bitcoins should be treated as “other property”. In addition, the use of the first-instance court’s arguments opens the door for infringement of property rights of creditors. The first-instance court’s ruling is an obvious illustration of dominant textualism in Russian judiciary. The appellate court’s decision, on the other hand, demonstrates that said textualism could be overcome by judiciary actions at least in some circumstances such as defense of creditors’ rights. The treatment of cryptocurrency as “other property” by the court is in general agreement with the conception of the Ministry of Finance’s draft law “On digital financial assets”.

Keywords: bitcoin, digital financial assets, virtual currency, legal status of cryptocurrency, bankruptcy.

JEL: K11, K24, K35.

Yury V. Kuznetsov, Cand. Sci. (Econ.). Financial Research Institute (str. 2, 3, Nastasyinskiy per., Moscow, 127006, Russian Federation); Editorial Board of the Journal “Economic Policy” (str. 1, 3–5, Gazetny per., Moscow, 125009, Russian Federation).

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Abstract

The article examines the spatial balance in development of Russian cities based on Zipf’s law and the proposed grouping (quadrants) of urban districts for the differentiation of regulatory measures in population and gross agglomeration product. Selective measures of benefits support and risk reduction in regards to agglomeration by type of urban district are proposed. The analysis of the production structure has shown a significant role of large urban settlements in the production of gross agglomeration product and its share in the gross regional product. This applies to urban districts with a population of more than 250 thousand people: in 2016 their share in regional production was 53.2%, and the share of profit was 62.7% with the share of employment of about 25%. Accordingly, the level of wages in large urban districts is 25% higher than in other settlements of the Russian Federation, with double superiority in labor productivity. In addition, strong dependence of wages on labor productivity has been established, which equals 66.4% in large urban districts and 61.7% in other regions of the Russian Federation. Panel regression methods were used to identify agglomeration factors. The regression parameters indicate that to medium to large urban districts, the density of the territory infrastructure and the density of transactions serve as drivers of productivity growth and wages. These parameters are complex and determine the specifics and efficiency of production, forming an increase in the standard of living. Developed infrastructure and economic institutions give rise to economies of scale and ensure saturation of social and economic communications.

Keywords: agglomerations in Russia, urban districts, models of agglomeration effects, selective policies of spatial development.

JEL: C54, E02, O18, R12.

Viktor A. Rusanovskiy, Dr. Sci. (Econ.), Professor. Saratov Socio-Economic Institute, Plekhanov Russian University of Economics (89, Radishcheva ul., Saratov, 410003, Russian Federation).

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Vladimir A. Markov, Cand. Sci (Econ.), Associate Professor. Saratov Socio-Economic Institute, Plekhanov Russian University of Economics (89, Radishcheva ul., Saratov, 410003, Russian Federation).

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Anna V. Brovkova. Saratov Socio-Economic Institute, Plekhanov Russian University of Economics (89, Radishcheva ul., Saratov, 410003, Russian Federation).

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Abstract

The article explains the necessity to adapt the theory of regional resilience in Russia’s domestic science, considering the existing Western concepts, and determines the prerequisites for the formation of the theory of resilience of regional economic systems in Russian science. The definitions of the concept of “resilience” from different fields of knowledge and their interpretation in the field of regional economy and economic geography are given. The conceptual bases of evolutionary accounting of regional economic stability and adaptation are also considered, and the basic properties and factors influencing regional stability are determined. The notion of “resilience” is very important for understanding the process and models of uneven regional development, but the critically broad interpretation of this concept is a significant obstacle in building theoretical foundations and developing appropriate public policy measures. The authors identify the main factors affecting the resilience of the regional economic system: the ability of the region’s economy to adapt to changing economic conditions and to overcome crisis recessions; the availability of modern infrastructure, skilled personnel and business entities; a diversified economy; a strong system of innovation and research; a stable financial system; demographic trends; regional policy etc. The authors conclude that there is no single equilibrium state of the economy: crisis and shock situations shift the economy from its equilibrium path, after which it either restores its former growth path, or goes to the underlying trajectory or to an improved path of growth.

Keywords: Resilience, sustainability, sustainable development, regional economic system, regional development.

JEL: E6, O2, O4.

Vladimir V. Klimanov, Dr. Sci. (Econ.). Russian Presidential Academy of National Economy and Public Administration (82, Vernadskogo pr., Moscow, 119571, Russian Federation); Autonomous Non-Commercial Organization “Institute for Public Finance Reform” (str. 2, 1, Bol’shoy Kislovskiy per., Moscow, 125009, Russian Federation).

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Sofia M. Kazakova. Autonomous Non-Commercial Organization “Institute for Public Finance Reform” (str. 2, 1, Bol’shoy Kislovskiy per., Moscow, 125009, Russian Federation).

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Anna A. Mikhaylova, Cand. Sci. (Econ.). Russian Presidential Academy of National Economy and Public Administration (82, Vernadskogo pr., Moscow, 119571, Russian Federation); Autonomous Non-Commercial Organization “Institute for Public Finance Reform” (str. 2, 1, Bol’shoy Kislovskiy per., Moscow, 125009, Russian Federation).

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Abstract

The article provides an overview of the social and economic effects of restructuring healthcare on the basis of regular use of genetic data. The review covers such problems as medical efficiency of the proposed model, its affordability and economic efficiency (micro and macro levels), and external (technical, behavioral, ethical, and legal) constraints. Empirical studies indicate low medical and economic efficiency of universal coverage of whole genome sequencing. For most diseases, genome analysis does not allow one to take adequate measures to prevent risk of suffering from it given the lack of information about its genetic nature, the limited role of genetic factors in onset and progression of diseases and the absence of effective low risk management practices. The combination of rarity of significant genetic variants and low efficiency of early prevention leads to worse efficiency of universal genetic screening compared with traditional preventive measures. Promising directions for genome medical technologies in the short and medium term are diagnosis of hereditary diseases and strong predisposition to certain diseases as well as drug therapy personalization. The rate of adoption of new technologies in regular clinical practice will be determined by the willingness of the state and private entities to invest in the required infrastructure, including creating national banks for genetic data, acquiring equipment for analysis and storing the data obtained, and training of qualified personnel. At the moment Russia has a backlog of several years in this area compared with advanced countries. The national program for the development of genetic technologies, capable of closing the gap, is expected to be approved in early 2019.

Keywords: genetic risk, genome sequencing, P4 medicine, personalized medicine.

JEL: I18.

Vladimir S. Nazarov, Cand. Sci. (Econ.). Financial Research Institute (str. 2, 3, Nastasyinskiy per., Moscow, 127006, Russian Federation); Russian Presidential Academy of National Economy and Public Administration (11, Prechistenskaya nab., Moscow, 119034, Russian Federation).

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Natalya N. Sisigina. Financial Research Institute (str. 2, 3, Nastasyinskiy per., Moscow, 127006, Russian Federation); Russian Presidential Academy of National Economy and Public Administration (11, Prechistenskaya nab., Moscow, 119034, Russian Federation).

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Abstract

The tsarist government and foreign businessmen had a great influence on the economic development of the Russian Empire. In the early 20th century, the position of Western capital in Russia became stronger, but how significant was this increase? Could foreign business have been able to take over the functions of managing and regulating the national economy from the Russian government? The author attempts to answer this question by examining it on a specific example: the “Kerch matter” of 1899–1903. This is the name contemporaries gave to the conflict between the Russian government and French capitalists close to the Company of Bryansk Factory, which arose because of metallurgical facilities on the Kerch Peninsula. The analysis of the case and its results is conducted on the basis of published sources and documentary materials from Russian archives. The results of work done have shown that the imperial state machine represented by the then Minister of Finance Sergei Witte managed to emerge victorious from the “Kerch matter”. Having succeeded in stopping production at the Kerch factory and preventing the bankruptcy of the Bryansk Company, the Russian authorities were able to contain the infiltration of financial groups such as the Société Générale into the metallurgical market of the South of Russia, which, in the conditions of the industrial recession of 1900–1903, threatened to cause a massive collapse in prices. The “Kerch matter” was the last attempt of Western European capital to intervene in the issues of control over the economy, which were subordinated to the Russian state.

Keywords: State Bank of the Russian Empire, Ministry of Finance of the Russian Empire, Sergei Witte, Louis Dorizon, financial capital, foreign investment.

JEL: N23.

Yasyn S. Abdullaev. Institute of History, Saint Petersburg State University (7–9, Universitetskaya nab., Saint Petersburg, 199034, Russian Federation).

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