Dutch disease and sustainability of the Russian political economy

Author/s Giovanni Covi
Publishing Year 2015 Issue 2014/2 Language English
Pages 36 P. 75-110 File size 458 KB
DOI 10.3280/EFE2014-002005
DOI is like a bar code for intellectual property: to have more infomation click here

Below, you can see the article first page

If you want to buy this article in PDF format, you can do it, following the instructions to buy download credits

Article preview

FrancoAngeli is member of Publishers International Linking Association, Inc (PILA), a not-for-profit association which run the CrossRef service enabling links to and from online scholarly content.

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.

Keywords: Sustainable Development, Russia, Dutch Disease, natural resources, energy economics, economic growth

Jel codes: E52, P28, O11, Q32, Q33, Q43

  1. Corden W. M. (1984). Booming Sector and Dutch Disease Economics: Survey and Consolidation. Oxford economic Papers , 36, 359-380.
  2. Corden W. M., Neary J. P. (1982). Booming sector and De-industrialization in a Small Open Economy. The Economic Journal, 92, 825-848.
  3. Deutsche Bank Research (2010). Emerging Europe Outlook, 1-27.
  4. Auty R. M. (1994). Industrial Policy Reform in Six Large Newly Industrializing Countries: the Resource Course. World Development, 22, 11-26.
  5. Auty R. M. (Ed) (2001). Resource Abundance and Economic Development. Oxford University Press, Oxford
  6. British Petroleum (2011). Statistical Review of the World Energy.
  7. Borkò T. (2007). The Suspicious of Dutch Disease in Russia and the ability of the government to counteract . Working Paper 35, ICEG European Center, Brunnschweiler C. (2007). Cursing the Blessings? Natural Resource Abundance, Institutions, and Economic Growth. World Development, 36. 399-419.
  8. Brunnschweiler C., Bulte E. (2008). The resource curse revisited and revised: a tale of paradoxes and herrings, Journal of environmental economics and management , 55, 248-264.
  9. Connolly R. (2008). The structure of Russian Industrial Exports in Comparative Perspective. Eurasian Geography and Economics, 49, 5, 586-603.
  10. Connolly R., Hanson P. (2012). Russia’s Accession to the World Trade Organization, Eurasian Geography and Economics, 53, 4.
  11. Cooper J. (2006). Can Russia compete in the Global Economy?. Eurasian Geography and Economics, 47, 4, 407-425.
  12. Deutsche Bank Research (2009). “ The Russian Regions”, September 18, pp. 1-20.
  13. Deutsche Bank Reserach (2014). “The Economics of Sanctions: The West Can Afford to Be Tough”, May 16, pp. 1-8.
  14. Dobrynskaya V., Turkisch E. (2010). Economic Diversification and Dutch Disease in Russia. Post-Communist Economies, 22, 3, 283-302.
  15. Égert B. (2007). Balassa Samuelson Meets South-Eastern Europe, the CIS and Turkey: a Closer Encounter of the Third Kind?. The European Journal of Comparative Economics, 2, 221-243.
  16. Egert B. (2013). Dutch Disease in the Post-Soviet Countries of Central and South-West Asia: How Contagious is it?. CISifo Working Paper 4186.
  17. Ellman M. (Ed.) (2006). Russia’s Oil and Natural Gas. Anthem Press, London European Bank for Reconstruction and Development (2006). Strategy for the Russian Federation. London, UK EBRD.
  18. Eurostat Database (2012) Federal State Statistics Service (2012)
  19. Fetisov G. (2007). The Dutch Disease in Russia. Problems of Economic Transition, 50, 53-73.
  20. Harford T., Klein M. (2005). Aid and the Resource Curse. The World Bank Group, Private Sector Development Vice Presidency, Note #291, Washington, DC.
  21. IMF, WB, OECD, EBRD (1990). The Economy of the USSR. A study undertaken in response to a request by the Houston Summit, World Bank, Washington, D.C.
  22. International Monetary Fund (2005). Russian Federation: statistical appendix, Country Report No. 05/378, Washington.
  23. Krugman P. (1987). The Narrow Moving band, The Dutch Disease, and the Competitive Consequences of Mrs. Thatcher. Journal of Development Economics, 27, 41-55.
  24. Locatelli C., (2014). The Russian Gas Industry: Challenges to the ‘Gazprom Model’?. Post-Communist Economies, 26, 1, 201.
  25. Markandya A., Averchenkova A. (2001). Reforming a Large Resource-Abundant Transition Economy: Russia, in R. T. Auty (Ed), Resource Abundance and Economic Development. Oxford University Press, Oxford.
  26. Mehlum H., Moene K. O., Torvik R. (2006). Institutions and the resource curse. The Economic Journal, 116, 1-20.
  27. Myint H. (1958). The classical theory of international trade and underdeveloped countries. The Economic Journal, 68, 317-337.
  28. Neary P., Van Wijnbergen S. (1984). Can Oil Discovery Lead to a Recession? A comment on Eastwood and Venables. The Economic Journal, 94, 390-395.
  29. Oomes N., Kalcheva K. (2007). Diagnosing Dutch Disease: Does Russia have the symptoms?. International Monetary Fund, WP/07/102, 1-34.
  30. Pasinetti L. (1981). Structural Change and Economics Growth: a theoretical essay on the dynamics of the wealth of nations. Cambridge University Press, Cambridge.
  31. Perlez J. (2014), China and Russia Reach 30-Year Gas Deal. The New York Times, 27/05.
  32. Sachs J. D., Warner A. (1995). Natural Resource Abundance and Economic Growth. Working Paper 5398, NBER.
  33. Skalamera M. (2013). EU-Russia Cooperation in a rapidly changing interregional gas market. Economics and Policy of Energy and the Environment, 3.
  34. Skeet I. (1988). Opec: twenty-five years of prices and politic. Cambridge University Press, Cambridge.
  35. Solanko L. (2011). Why energy Efficiency is vitally important for Russia? International Association for Energy Economics, 1-52.
  36. Spilimbergo A. (2005). Measuring the performance of the fiscal policy in Russia. International Monetary Fund, WP/05/241.
  37. Smith B. Dutch Disease and Oil and Boom and Bust, OxCarre Research Paper 133, University of Oxford, 2014, pp.1-28.
  38. Talus K. (2012). Winds of Change: Long-Term gas Contracts and Changing Energy Paradigms in the European Union. In Kuzemko et al. (Eds.). Dynamics of of Energy Governance in Europe and Russia. Palgrave Macmillan, 227-242.
  39. The Economist (1977). The Dutch Disease. November 26th.
  40. The Economist (2012). The Rise of State Capitalism. January 21st.
  41. The Economist (2012). Economic and Financial Indicators. August 18th.
  42. United Nations Database (2013)
  43. Van Wijnbergen S. (1984). Inflation, employment and the dutch disease in oil exporting countries: A short-run disequilibrium analysis. Quarterly Journal of Economics, 99(2), 233–250.
  44. Van Wijnbergen S., Budina N. (2011). Fiscal sustainability, volatility and oil wealth. A stochastic analysis of fiscal spending rules. Economics of Transition, 19, 4, 639-666.
  45. World Bank Database (2012)
  46. Worldwide Inflation Database (2014)

  • Trade interdependence between Russia vs. the European Union and China within the context of the competitiveness of the Russian economy Krzysztof Falkowski, in Equilibrium. Quarterly Journal of Economics and Economic Policy /2018 pp.667
    DOI: 10.24136/eq.2018.032
  • Reduction Of An Economy's Raw Material Dependence And The Human Capital Of A Country Viacheslav Perepelkin, Elena Perepelkina, in Comparative Economic Research. Central and Eastern Europe /2017 pp.53
    DOI: 10.1515/cer-2017-0004

Giovanni Covi, Dutch disease and sustainability of the Russian political economy in "ECONOMICS AND POLICY OF ENERGY AND THE ENVIRONMENT" 2/2014, pp 75-110, DOI: 10.3280/EFE2014-002005