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Dutch disease and sustainability of the Russian political economy

Author

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  • Giovanni Covi
Abstract
The paper aims at investigating the dependency of the Russian economy on natural resources, underlining the causes and the possible consequences of this growth strategy. The analysis tries to evaluate if the Russian manufacturing has contracted the "Dutch Disease", that is, if a boom in the oil and gas industry has led to a process of de-industrialization, directly through the resource movement effect and indirectly through the spending effect. In this investigation it will be emphasized the role played by the learning curves as a crucial factor in determining the comparative advantages of a country, and why an excessive reliance on exports of a single product may reduce the welfare of a nation in the long run. The research underlines how the structure of the Russian economy has been built to favor the energy industry instead of the manufacturing one. This strategy has strengthened the comparative advantage that Russia enjoyed in natural resources, so as to reduce the return on investment in the manufacturing sector, which has had to struggle also with the constant appreciation of the exchange rate. This, in the end, has produced the so called de-industrialization process, which has transformed Russia into a service-based economy. The problem resulting from this is that, when a shock happens, the economy is no more able to soften its effects. To absorb the shock, it is necessary a higher government?s expenditure or switching to a higher level of unemployment, producing instability and volatility in the country.

Suggested Citation

  • Giovanni Covi, 2014. "Dutch disease and sustainability of the Russian political economy," ECONOMICS AND POLICY OF ENERGY AND THE ENVIRONMENT, FrancoAngeli Editore, vol. 2014(2), pages 75-110.
    • Handle: RePEc:fan:efeefe:v:html10.3280/efe2014-002005
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    References listed on IDEAS

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    1. Simone Auer & Emidio Cocozza & Andrea COlabella, 2016. "The financial systems in Russia and Turkey: recent developments and challenges," Questioni di Economia e Finanza (Occasional Papers) 358, Bank of Italy, Economic Research and International Relations Area.

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    More about this item

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • P28 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Natural Resources; Environment
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • Q33 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Resource Booms (Dutch Disease)
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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