1. 17th September, 2016 Ekaterinburg
Ethno-cultural diversity of the Russian regions: Does it matter for economic performance?
Leonid Limonov, Academic Director of the Graduate Program “Public Administration” of the National Research University “Higher School of Economics” - St Petersburg Branch, Russia; Director-Coordinator of the research program, ISCER Leontief Centre
Marina Nesena, Researcher at the International Centre for Social and Economic Research “Leontief Centre”; Lecturer at the National Research University “Higher School of Economics” – St Petersburg
Workshop on Regional Economics: Theoretical and Empirical Results with Applications
17th September, 2016 Ekaterinburg

2. Facts (1)
In the Russian Empire in 1897 only about 40% of the population were Russians.
USSR mainly inherited the ethnic structure of the Russian Empire. At the end of the Soviet era the share of Russians was 50.7 percent (Census of 1989)
Modern Russia emerged in 1991 as a result of the collapse of the USSR. It inherited the territory of the Russian Soviet Federal Socialist Republic (RSFSR), one of the 15 Union Republics, where Russians were dominant, but where there are ethnic territories (republics and districts) and where the ethnic composition of total population includes all ethnic groups of the former Empire.

3. Facts (2)
About 80 percent of the current population of the Russian Federation identified themselves (according to the 2010 Census) as Russians.
Interregional migration in Russia is very low (it was higher in 1990s, just after the liberalization).
Net migration flows are directed from the East (the Far East and some regions of Siberia) and the North (from the Arctic zone) to the Central European Russia and the South.
International migration flow is mainly formed by migrants from the CIS countries (Middle Asia countries, Belarus, Ukraine, Moldova, Transcaucasia countries ).

4. Hypotheses
The regions of Russia differ significantly in their ethnic diversity as well as in the diversity of their population by country and region of origin.
Ethnic diversity does not significantly influence economic growth, but it should influence social policy and budget allocation, because a greater share of the non-Russian population in the region is a matter of а greater concern for federal and regional politicians and decision makers.
Economic growth and the productivity may be associated with international and interregional migration, suggesting that cultural diversity, in particular, birthplace diversity, significantly influences urban economic performance, with the strongest impact in metropolitan cities.
Unfortunately, Census data are available only at the sub-national level (for 83 subjects of the Russian Federation), and so we cannot test this hypothesis, although Moscow and St Petersburg, which are cities of federal significance and subjects of the Russian Federation, demonstrate higher levels of cultural diversity and higher (especially Moscow) economic results and productivity.

5. Measure of the heterogeneity of the population
A frequently used social science method of calculating cultural heterogeneity is the Herfindahl index ( in biology this index is known as the Simson index) :
𝐷𝑖𝑣𝑒𝑟𝑠𝑖𝑡𝑦 𝑗 = 𝑖=1 𝑀 𝑆ℎ𝑎𝑟𝑒 𝑖𝑗 (1− 𝑆ℎ𝑎𝑟𝑒 𝑖𝑗 )
where 𝑆ℎ𝑎𝑟𝑒 𝑖𝑗 is the share of the group of cultural identity 𝑖 in the population of area 𝑗 .
Sources of data: 2002 and 2010 All-Russia Censuses and data of the project “Arena”, Atlas of Religions and Nationalities of the Russian, Research service «Sreda»

8. Diversity among population of foreign origin

12. Summary of results (1) Model Empirical Model Significant Results
Significant results of the models with spatial effects
𝛽-Convergence (R.Barro and X.Sala-i-Martin)
1 𝑇 𝑙𝑛 𝑌 𝑇,𝑖 𝑌 𝑡 0 ,𝑖 =𝛼+𝛽𝑙𝑛 𝑌 𝑡 0 ,𝑖 +𝛾 𝐷𝑖𝑣𝑒𝑟𝑠𝑖𝑡𝑦 𝑡 0, 𝑖 +𝛿 𝑋 𝑡 0 ,𝑖 + 𝜀 𝑖
Diversity by country and region of origin (+)
Diversity of population of foreign origin (-)
TFP determinants (Solow, Easterly&Levin))
𝑙𝑛 𝑇𝐹𝑃 𝑗𝑡 =𝛼+ 𝐷𝑖𝑣𝑒𝑟𝑠𝑖𝑡𝑦 𝑗𝑡 𝑇 𝛽+ 𝑋 𝑇 𝑗𝑡 𝜑+ 𝜇 𝑡 + 𝜌 𝑗 +𝑢 𝑗𝑡
Share of indigenous population (-)

13. Summary of results (2) Model Empirical Model Significant Results
Significant results of the models with spatial effects
Knowledge production function (Z.Griliches)
𝑌 𝑂𝑢𝑡𝑝𝑢𝑡 =𝑎∙ 𝐹𝑎𝑐𝑡𝑜𝑟 1 𝐼𝑛𝑝𝑢𝑡 𝛼 ∙ 𝐹𝑎𝑐𝑡𝑜𝑟 2 𝐼𝑛𝑝𝑢𝑡 𝛽
𝑌 𝑗,𝑡 =𝐹( 𝑅&𝐷 𝑗,𝑡 , 𝐻𝐾 𝑗𝑡 , 𝐷𝑖𝑣𝑒𝑟𝑠𝑖𝑡𝑦 𝑗𝑡 , 𝑋 𝑗𝑡 , 𝑊𝑅&𝐷 𝑗,𝑡 ,
𝑊 𝐻𝐾 𝑗𝑡 , 𝑈 𝑗𝑡 )
Diversity of population within the group of foreign origin (+)
Diversity by region of origin (-)
Diversity of population of foreign origin (+)
Wage and Rent Differentials (G.Ottaviano, G.Peri, J.Roback)
Wage regression
𝑙𝑛 𝑦 𝑗𝑡 =𝛼+ 𝐷𝑖𝑣𝑒𝑟𝑠𝑖𝑡𝑦 𝑗𝑡 𝑇 𝛽+ 𝑋 𝑇 𝑗𝑡 𝜑 𝐼 + 𝜇 𝑡 + 𝜌 𝑗 +𝑢 𝑗𝑡
Diversity by country and region of origin (-) _
Rent regression
𝑙𝑛 𝑝 𝑗𝑡 =𝛼+ 𝐷𝑖𝑣𝑒𝑟𝑠𝑖𝑡𝑦 𝑗𝑡 𝑇 𝛽+ 𝑋 𝑇 𝑗𝑡 𝜑 𝑃 + 𝜇 𝑡 + 𝜌 𝑗 +𝑢 𝑗𝑡

14. Summary of results (3) Model Empirical Model Significant Results
Significant results of the models with spatial effects
Model of heterogeneity of voter preferences (A. Alesina et al)
𝑙𝑛 𝑦 𝑗𝑡 =𝛼+ 𝐷𝑖𝑣𝑒𝑟𝑠𝑖𝑡𝑦 𝑗𝑡 𝑇 𝛽+ 𝑋 𝑇 𝑗𝑡 𝜑+ 𝜇 𝑡 + 𝜌 𝑗 +𝑢 𝑗𝑡
Ethnic diversity (-) in regression with the share of spending on education as a dependent variable _

15. Conclusions (1)
First, in general there is no relationship between the ethnic heterogeneity of the population in the Russian regions and economic growth and convergence. A significant negative relationship between ethnic fractionalization and the rate of economic growth was observed only in regions with a small economically active population. Ethnic fragmentation was also a non-significant factor for production or consumption externalities.
Second, the results revealed an association between the economic growth rate and the heterogeneity of the population by country and region of origin, but did not allow any conclusions concerning causality. Obviously, inward migration is a reaction to the higher rates of economic growth in the receiving region. However, migrants may in turn contribute to regional economic growth, because in Russia migrants move only to work and are not supported from public social funds. To solve the problem of endogeneity, the further research should develop a structural equations model.

16. Conclusions (2)
Third, the analysis of the impact of cultural diversity on productivity revealed that in regions with a higher density of population, interregional and international migration was a disamenity for (contributes negatively to) the production externality. For regions with a small active population, the heterogeneity of population by region of origin was an amenity not for the production but for the consumption externality.
Fourth, this study revealed one more unexpected and somewhat discouraging result. The share of spending on education from regional budgets was inversely related to the ethnic heterogeneity of the Russian regions . More detailed analysis is needed however to check the robustness of these results and to improve understanding of collective action in public goods provision in ethnically heterogeneous regions.