Russia’s spatial disparities stem largely from its economic geography, which is unique and has no parallels even when compared to seemingly similar countries such as Australia and Canada.
... See More + While Australia and Canada also have large land masses and even lower population densities than Russia, a large share of their populations live near the border or the sea. In contrast, Russia’s people are more dispersed inland. Moreover, the populations of Australia and Canada are concentrated in major cities: more than two-thirds of their populations live in the three largest urban centers. On the other hand, Moscow, St. Petersburg, and Nizhny Novgorod are home to only one-eighth of Russia’s population. Combined with its population decline, an aging workforce, and having to constantly adapt to a sequence of economic shocks, Russia’s unique economic geography has therefore led to a spatial pattern of development counter to what is observed in other large countries. What explains Russia’s unique economic geography and its spatial disparities? A cocktail of three factors is useful for answering this question: (i) a persistent Soviet legacy; (ii) a diverse physical geography laced with harsh climactic conditions; and (iii) a dominance of natural resources (mostly oil/gas) in peripheral regions. The Soviet legacy of a planned economy remains a burden for regions. One indicator of this persistent legacy can be seen in the ongoing socio-economic challenges facing Soviet-era industrial monotowns. Today, 319 settlements in Russia are legally identified as monotowns, with 94 classified as monotowns with a high level of socio-economic deprivation. This is despite them remaining a target of many support programs implemented by the federal government. Geography and climactic conditions do not help the situation. Russia accounts for 42 percent of the world’s land mass but its population is less than 1.9 percent of the world’s population. In addition, its extreme winter weather greatly impairs transportation services (built on continuous permafrost, Yakutsk is the coldest major city in the world, recording temperatures as low as minus 64.4°C). A sequence of shocks that hit the country over the last 25 years and the boom in the oil industry created rapid growth in peripheral, oil-rich regions. But other regions have been stymied by the persistence of structural constraints: an industrial legacy, population decline, and an aging population.
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Russia’s spatial disparities stem largely from its economic geography, which is unique and has no parallels even when compared to seemingly similar countries such as Australia and Canada.
... See More + While Australia and Canada also have large land masses and even lower population densities than Russia, a large share of their populations live near the border or the sea. In contrast, Russia’s people are more dispersed inland. Moreover, the populations of Australia and Canada are concentrated in major cities: more than two-thirds of their populations live in the three largest urban centers. On the other hand, Moscow, St. Petersburg, and Nizhny Novgorod are home to only one-eighth of Russia’s population. Combined with its population decline, an aging workforce, and having to constantly adapt to a sequence of economic shocks, Russia’s unique economic geography has therefore led to a spatial pattern of development counter to what is observed in other large countries. What explains Russia’s unique economic geography and its spatial disparities? A cocktail of three factors is useful for answering this question: (i) a persistent Soviet legacy; (ii) a diverse physical geography laced with harsh climactic conditions; and (iii) a dominance of natural resources (mostly oil/gas) in peripheral regions. The Soviet legacy of a planned economy remains a burden for regions. One indicator of this persistent legacy can be seen in the ongoing socio-economic challenges facing Soviet-era industrial monotowns. Today, 319 settlements in Russia are legally identified as monotowns, with 94 classified as monotowns with a high level of socio-economic deprivation. This is despite them remaining a target of many support programs implemented by the federal government. Geography and climactic conditions do not help the situation. Russia accounts for 42 percent of the world’s land mass but its population is less than 1.9 percent of the world’s population. In addition, its extreme winter weather greatly impairs transportation services (built on continuous permafrost, Yakutsk is the coldest major city in the world, recording temperatures as low as minus 64.4°C). A sequence of shocks that hit the country over the last 25 years and the boom in the oil industry created rapid growth in peripheral, oil-rich regions. But other regions have been stymied by the persistence of structural constraints: an industrial legacy, population decline, and an aging population.
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This paper has the goal of presenting the first comprehensive update of poverty, inequality and shared prosperity trends – and key drivers of these trends – since 2003 until 2015, that is starting with the end of the most recent poverty assessment published in 2004 and that covered the period 1997-2002.
... See More + In addition to discussing the past trends, the paper also aims to present some emerging challenges to continued poverty reduction and inclusive growth in the near future. Relying on data from the Household Sample Survey, the paper focuses on the dynamics of the main sources of livelihood of households – labor income, pensions as well as direct transfers and indirect subsidies – as key contributors to the evolution of overall disposable incomes of households, in order to understand what lay behind the evolution of poverty and shared prosperity of the 2003-2015 period. The paper also complements the cross-sectional, but more detailed, look at the contribution of the Belarus fiscal system to poverty and inequality provided by the Commitment to Equity analysis (Bornukova, Shymanovich and Chubrik, 2017), by providing a temporal dimension. The evolution of poverty and shared prosperity in Belarus should be viewed in the context of rapid economic growth during 2000-2008, followed by a period of slower growth, and increased volatility, ending in recession.Growth in wages and pensions were the main drivers of shared prosperity in Belarus, particularly prior to the financial crisis, with an increasing importance of social transfers in the second half of the period.The recent deterioration of the external environment has shone a light on the degree of vulnerability of low income households and raises questions about the sustainability of past shared prosperity gains.While the economy faces multiple challenges, this paper highlights two challenges to inclusive growth, the prominence of which is being accentuated by the recent recession – the impact of population ageing, and the need to provide an adequate safety net in the context of ongoing reforms, notably in the utilities sector.Meanwhile, ongoing reforms in the utilities sector will diminish the support to households in the form of subsidized utilities prices, which, absent compensatory measures, can have a notable welfare impact.
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In addition to its impact on economic growth and macroeconomic stability, fiscal policy affects the distribution of income across households and individuals through the use of taxes and expenditures.
... See More + As a result, policy makers and development partners are likely to be interested in the answers to, among others, the following questions: what is the combined impact of taxes and transfers on poverty and inequality?; how progressive or regressive are different fiscal interventions, and what are their contributions to the overall impact?; what is the distributive efficiency of the existing fiscal package?; what is the distributional impact of a particular policy reform?; and what are the characteristics of net payers into and net beneficiaries from the fiscal package? The World Bank has partnered with the Commitment to Equity (CEQ) Institute at Tulane University to answer these questions using the Institute’s comprehensive fiscal incidence diagnostic tool. This tool - the CEQ assessment is designed to assess how taxation and public expenditures affect the income of different households, individuals, and socioeconomic groups as well as the distribution of income across the entire population. This volume presents a set of studies for low- and middle-income countries that use the CEQ approach to examine the distributional effects of individual taxes, transfers, and subsidies as well as their combined impact. The studies presented in this volume are part of a larger research effort led by Tulane’s CEQ Institute in collaboration with the World Bank and other institutions aimed at increasing the information available on fiscal incidence in developing countries. To the extent that these assessments provide an evidence base for and bring an equity lens to the decision-making process surrounding tax and spending policy reforms, they will be valuable to both policy makers and development practitioners.
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This paper has the goal of presenting the first comprehensive update of poverty, inequality and shared prosperity trends – and key drivers of these trends – since 2003 until 2015, that is starting with the end of the most recent poverty assessment published in 2004 and that covered the period 1997-2002.
... See More + In addition to discussing the past trends, the paper also aims to present some emerging challenges to continued poverty reduction and inclusive growth in the near future. Relying on data from the Household Sample Survey, the paper focuses on the dynamics of the main sources of livelihood of households – labor income, pensions as well as direct transfers and indirect subsidies – as key contributors to the evolution of overall disposable incomes of households, in order to understand what lay behind the evolution of poverty and shared prosperity of the 2003-2015 period. The paper also complements the cross-sectional, but more detailed, look at the contribution of the Belarus fiscal system to poverty and inequality provided by the Commitment to Equity analysis (Bornukova, Shymanovich and Chubrik, 2017), by providing a temporal dimension. The evolution of poverty and shared prosperity in Belarus should be viewed in the context of rapid economic growth during 2000-2008, followed by a period of slower growth, and increased volatility, ending in recession.Growth in wages and pensions were the main drivers of shared prosperity in Belarus, particularly prior to the financial crisis, with an increasing importance of social transfers in the second half of the period.The recent deterioration of the external environment has shone a light on the degree of vulnerability of low income households and raises questions about the sustainability of past shared prosperity gains.While the economy faces multiple challenges, this paper highlights two challenges to inclusive growth, the prominence of which is being accentuated by the recent recession – the impact of population ageing, and the need to provide an adequate safety net in the context of ongoing reforms, notably in the utilities sector.Meanwhile, ongoing reforms in the utilities sector will diminish the support to households in the form of subsidized utilities prices, which, absent compensatory measures, can have a notable welfare impact.
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Addressing regional disparities is key to unlocking Russia’s potential to achieve stronger gains in growth and equity outcomes as well as to improve its institutional environment.
... See More + While spatial disparities have been an important policy concern in Russia for a long time, inequalities across its vast territory remain stark. This report explores the current state of regional disparities at the macro and micro-level, updating existing literature to reflect recent trends and providing new insights into household-level drivers of welfare. The report stresses that addressing spatial disparities does not necessary imply “balancing” growth across a geographic territory – but rather focusing on creating opportunities for all people, regardless of where they live.
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Moldova has experienced rapid economic growth in the past decade, which has been accompanied by reductions in poverty and good performance in shared prosperity.
... See More + Nonetheless, Moldova remains one of the poorest countries in Europe and faces challenges in sustaining the progress. The challenges for progress include spatial and cross-group inequalities, particularly because of unequal access to assets, services and economic opportunities. Moreover, strengthening the persistently weak labor markets to boost employment, especially in the nonfarm sectors, is critical for sustaining progress toward the twin goals of reducing poverty and expanding shared prosperity and for addressing the problems associated with an aging population in a fiscally responsible manner. Accordingly, ensuring the viability of the pension system and improving social assistance are necessary areas of reform, particularly in a context of fiscal pressures, the aging population, and the great vulnerability of the poor to shocks. The Moldova poverty assessment 2016 includes three prongs of analysis: this report, which explores trends and the drivers of poverty and shared prosperity, and the accompanying analyses, ‘a jobs diagnostic for Moldova’ and ‘structural transformation of Moldovan small-holder agriculture and its poverty and shared prosperity impacts.’ The jobs diagnostic explores the main labor demand and supply challenges in Moldova in more detail, while the analysis of structural transformation focuses on the agricultural sector and whether it can become a driver of progress.
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Working Paper 105722 MAY 01, 2016
Dávalos, María E.; Nguyen,Tu Chi; Matytsin,MikhailDisclosed
Moldova has experienced rapid economic growth in the past decade, which has been accompanied by reductions in poverty and good performance in shared prosperity.
... See More + Nonetheless, Moldova remains one of the poorest countries in Europe and faces challenges in sustaining the progress. The challenges for progress include spatial and cross-group inequalities, particularly because of unequal access to assets, services and economic opportunities. Moreover, strengthening the persistently weak labor markets to boost employment, especially in the nonfarm sectors, is critical for sustaining progress toward the twin goals of reducing poverty and expanding shared prosperity and for addressing the problems associated with an aging population in a fiscally responsible manner. Accordingly, ensuring the viability of the pension system and improving social assistance are necessary areas of reform, particularly in a context of fiscal pressures, the aging population, and the great vulnerability of the poor to shocks. The Moldova poverty assessment 2016 includes three prongs of analysis: this report, which explores trends and the drivers of poverty and shared prosperity, and the accompanying analyses, ‘a jobs diagnostic for Moldova’ and ‘structural transformation of Moldovan small-holder agriculture and its poverty and shared prosperity impacts.’ The jobs diagnostic explores the main labor demand and supply challenges in Moldova in more detail, while the analysis of structural transformation focuses on the agricultural sector and whether it can become a driver of progress.
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Working Paper 105722 MAY 01, 2016
Dávalos, María E.; Nguyen,Tu Chi; Matytsin,MikhailDisclosed
Do regions with higher working age populations grow faster? This paper examines this question using data from Russian regions and finds evidence that demographic trends influence regional growth convergence.
... See More + In other words, keeping other factors constant, poorer regions grow faster than richer regions, and some of the growth convergence is explained by demographic changes: faster growth in poor regions in the past was related in part to more favorable demographic trends. This finding has important consequences for Russia. If the demographic trends in poorer regions worsen in the future, this could dampen economic convergence. Unless there are significant increases in labor productivity or additions to the labor force through migration, growth in Russian regions will moderate as the Russian population shrinks and ages in the coming decades.
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Policy Research Working Paper WPS7501 NOV 23, 2015
Matytsin,Mikhail; Moorty,Lalita M.; Richter,KasparDisclosed
Do regions with higher working age populations grow faster? This paper examines this question using data from Russian regions and finds evidence that demographic trends influence regional growth convergence.
... See More + In other words, keeping other factors constant, poorer regions grow faster than richer regions, and some of the growth convergence is explained by demographic changes: faster growth in poor regions in the past was related in part to more favorable demographic trends. This finding has important consequences for Russia. If the demographic trends in poorer regions worsen in the future, this could dampen economic convergence. Unless there are significant increases in labor productivity or additions to the labor force through migration, growth in Russian regions will moderate as the Russian population shrinks and ages in the coming decades.
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Working Paper (Numbered Series) 125430 NOV 01, 2015
Matytsin,Mikhail; Moorty,Lalita M.; Richter,KasparDisclosed
Using household data from the Russian Longitudinal Monitoring Survey, this paper assesses how aging affects saving. To overcome a systematic bias against the life-cycle hypothesis of survey data, the paper estimates how the age profile of saving changes when the micro data are corrected to account for the contribution to pensions (as additional saving) and receipt of benefits from pensions (as dissaving).
... See More + With these corrections, the Russian data support the life-cycle hypothesis. A small decline in the aggregate saving rate, because of aging, can thus be expected. However, since aggregate saving rates result from a combination of age and cohort effects, this decline may not be significant. When extrapolating the rising trends of the cohort effect, the fact that younger generations are earning and saving more than older generation at the same age, the projection shows a growing aggregate saving rate. The changes in saving of future cohorts, for example because of changes in the growth rate of the economy, can affect the aggregate saving rate even more than aging.
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Policy Research Working Paper WPS7443 OCT 15, 2015
Russia’s recession deepened in the first half of 2015 with a severe impact on households. Adverse external conditions pose a serious challenge to short-term growth prospects.
... See More + Yet, high policy uncertainty prevails and the country’s outlook hinges not only on the evolution of external factors but also on its internal capacity to adapt to an increasingly difficult macro-fiscal context. The macro-fiscal adjustment heightens risks to financial stability and fiscal sustainability. Economic policy should support the economic transformation that began in 2014. While adapting to relative price changes and the reallocation of productive factors to new sectors is a difficult process, policies that facilitate Russia’s economic transformation can have lasting positive effects. Facilitating structural change will be especially critical as Russia strives to cope in the long-term with a simultaneous demographic and economic transformation driven by a rapidly aging and shrinking population and by the diminishing relative importance of the natural resource sector. Successfully addressing these challenges will require a combination of fiscal discipline, regulatory restraint, and institutional capacity building, while resisting pressure to adopt policies that may temporarily mitigate the disruptive effects of the adjustment process at the expense of long-term growth. In the short-term, strong signals indicating the government’s commitment to regulatory discipline and to policies that facilitate the macroeconomic adjustment process will speed up the recovery of private-sector confidence and promote investment despite tight financial conditions.В первом полугодии 2015 года рецессия в России углубилась, оказав серьезное воздействие на домохозяйства. На фоне напряженной геополитической обстановки и сохранения международных санкций экономика продолжила адаптироваться к шоку, связанному с ухудшением условий внешней торговли в 2014 году. На протяжении первого полугодия 2015 года цены на нефть и газ оставались низкими, что еще более обострило уязвимость России к волатильности на сырьевых рынках. В результате ослабления рубля некоторые отрасли получили ценовое преимущество, что позволило им нарастить экспорт и привлечь инвестиции в ряд несырьевых отраслей.
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Working Paper (Numbered Series) 100091 SEP 01, 2015
Russia’s recession deepened in the first half of 2015 with a severe impact on households. Adverse external conditions pose a serious challenge to short-term growth prospects.
... See More + Yet, high policy uncertainty prevails and the country’s outlook hinges not only on the evolution of external factors but also on its internal capacity to adapt to an increasingly difficult macro-fiscal context. The macro-fiscal adjustment heightens risks to financial stability and fiscal sustainability. Economic policy should support the economic transformation that began in 2014. While adapting to relative price changes and the reallocation of productive factors to new sectors is a difficult process, policies that facilitate Russia’s economic transformation can have lasting positive effects. Facilitating structural change will be especially critical as Russia strives to cope in the long-term with a simultaneous demographic and economic transformation driven by a rapidly aging and shrinking population and by the diminishing relative importance of the natural resource sector. Successfully addressing these challenges will require a combination of fiscal discipline, regulatory restraint, and institutional capacity building, while resisting pressure to adopt policies that may temporarily mitigate the disruptive effects of the adjustment process at the expense of long-term growth. In the short-term, strong signals indicating the government’s commitment to regulatory discipline and to policies that facilitate the macroeconomic adjustment process will speed up the recovery of private-sector confidence and promote investment despite tight financial conditions.В первом полугодии 2015 года рецессия в России углубилась, оказав серьезное воздействие на домохозяйства. На фоне напряженной геополитической обстановки и сохранения международных санкций экономика продолжила адаптироваться к шоку, связанному с ухудшением условий внешней торговли в 2014 году. На протяжении первого полугодия 2015 года цены на нефть и газ оставались низкими, что еще более обострило уязвимость России к волатильности на сырьевых рынках. В результате ослабления рубля некоторые отрасли получили ценовое преимущество, что позволило им нарастить экспорт и привлечь инвестиции в ряд несырьевых отраслей.
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Working Paper (Numbered Series) 100091 SEP 01, 2015
Russia’s economy contracted 4.6 percent in the second quarter, year-on-year, after a 2.2 percent contraction in the first quarter, but in June the pace of contraction slowed.
... See More + Russia’s second quarter balance of payment remained stable despite a weaker trade balance as the current account improved and capital outflows moderated. Receding oil prices and a further cut in the key policy rates in July brought the ruble exchange rate down to its lowest level since February. Preliminary poverty statistics for the first quarter of 2015 show a significant increase in the number of poor people.
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Second quarter gross domestic product (GDP) estimates and high-frequency indicators suggest continued weakness in the economy even before the latest round of economic sanctions introduced by the European Union (EU), the United States (U.S.), and other countries in late July.
... See More + The World Bank maintains its current 0.5 percent growth projection for 2014. Inflation slowed in July, but the wide-ranging ban on food imports the Russian authorities introduced in early August will likely increase short-term inflationary pressure and put the Central Banks 2014 inflation target further out of reach. Pressure on the Ruble resumed on the back of escalating geopolitical tension and advanced sanctions. The continued slowdown in Russia comes amid a sharp rebound in economic growth in the U.S. in the second quarter and a modest pickup in activity in China, while external financing conditions for developing countries remain favorable, reflecting continued accommodative policies in high-income economies. Global oil prices reversed their course in July as geopolitical risks emanating out of Iraq abated, but the ban of EU exports of oil drilling technology to Russia can drive up prices again.
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Second quarter gross domestic product (GDP) estimates and high-frequency indicators suggest continued weakness in the economy even before the latest round of economic sanctions introduced by the European Union (EU), the United States (U.S.), and other countries in late July.
... See More + The World Bank maintains its current 0.5 percent growth projection for 2014. Inflation slowed in July, but the wide-ranging ban on food imports the Russian authorities introduced in early August will likely increase short-term inflationary pressure and put the Central Banks 2014 inflation target further out of reach. Pressure on the Ruble resumed on the back of escalating geopolitical tension and advanced sanctions. The continued slowdown in Russia comes amid a sharp rebound in economic growth in the U.S. in the second quarter and a modest pickup in activity in China, while external financing conditions for developing countries remain favorable, reflecting continued accommodative policies in high-income economies. Global oil prices reversed their course in July as geopolitical risks emanating out of Iraq abated, but the ban of EU exports of oil drilling technology to Russia can drive up prices again.
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Financial market volatility has once again increased in response to concerns about the phasing out of Quantitative Easing (QE) in the United States (US).
... See More + However, the initial strong reaction by financial markets was tempered by assurances from the Federal Reserve that it intends to start slowing down the pace of its purchase later this year only if the economy continues to improve and when unemployment rate falls below 7 percent. The European Central Bank also assured markets that rates will remain low for longer. Monetary conditions in high-income countries are projected to remain accommodative and supportive of growth. Global growth is expected to improve, despite softer than anticipated activity in the second quarter. Growth is currently driven by accelerating growth in the US, which is likely to benefit in the second half of the year from a recovering housing market and employment growth. But there are also early indications of improving activity elsewhere: First, the latest Purchasing Manager Indices (PMIs) indicate that the UK services sector expanded at its fastest pace in more than six years. Also Euro Area PMIs achieved a first, albeit faint, rise in activity for 18 months, sustained by the rebound in German business activity, while the downturns in France, Italy and Spain eased in July. Second, industrial production growth has been accelerating and has reached growth rates of 3.8 percent and 5.9 percent in the Euro Area and Japan respectively. In contrast, growth in developing countries has been slowing, even though it remains relatively strong. Q1 growth in developing countries came in at 4.6 percent, down from 5.5 percent in Q4 2012, thereby registering the slowest quarterly growth rate in more than a year. The latest industrial production figures suggest further slowing, with industrial production growth falling to 2.9 percent in May, down from 8.0 percent in January. Also, prospects for a quick recovery look slim, with PMIs in developing countries remaining weak. China’s PMI stood at 51.3 in July, unchanged from June and just marginally above a 20-month low of 51.1 in April. Excluding China, the developing countries’ PMI fell below the critical 50 level for the first time since the end of 2011.
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