1. Rents and instability : the Russian growth model tested again
Julien Vercueil, INALCO, Paris

2. Russia's double paradox
Russia, a paradoxical emerging country
Three decades of economic trajectoires : Russia’s record compared
China
India
Russia
South Africa
Brazil

3. Explaining trajectories : productivity, institutional changes and « growth models »
A Growth model (in the short to medium run) is a way of combining productivity growth and institutional change :
no « one best way », but several coherent combinations of institutions and economic trajectories (Serra and Stiglitz, with Rodrik, 2008)
Question n°1 that links productivity and the institutional framework : where does productivity growth come from?
Question n°2: how are productivity gains redistributed ?
Each emerging economy provides its own answers to these questions

4. BRIC’s catching-up trajectories compared: some clues of a rent-based growth trajectory
(2,1) : R&D/GDP
(2,1)
(2,08)
(2,0)
(1,0)
(1,16)
(0,97)
(0,81)
(0,73)

5. From the Dutch Disease to the Rent based Disease
Sources of productivity growth in Russia (Kudrin and Gurvitch, 2014) : +2,5 % /year directly coming from windfall gains
Standard way to analyse this problem : « Dutch Disease » model – a static model without institution
Source : Total Economy Database 2017, author’s elaboration

6. Main characteristics of a rent-based growth model
Oil and gas rent : extra revenues obtained from the ownership of a particular kind of asset (subsoil natural resources)
Main challenges :
Exogeneity [external shocks disconnected from productivity gains]
Redistribution [multiple distorsions : monetary, fiscal, financial, by sectors (Kudring and Gurvitch, 2014)]
Instability [volatility of international prices]

7. Instability and Russia’s rent-based growth model
Financial instability :
Exchange rate and oil prices
Financial markets and oil prices, banking system and exchange rate
Buffers : Currency reserves of BCR – but limited
Monetary instability :
Exchange rate crises and inflation (1998, 2008, 2015)
Buffers : Monetary policy and Interest rates – but limited
Fiscal instability :
Oil prices and fiscal revenues (federal and local)
Buffers : Sovereign funds (Reserve fund and National welfare fund) – but limited

8. Instability and Russia’s rent-based growth model (continued)
Growth instability (elasticity of GDP to oil prices)
Institutional lock-in : Windfall gains seem to play a role in the perpetuation of the low-quality of institutional framework in Russia
Low level of fiscal pressure on economic agents => paternalistic style of government, low pressure from taxpayers for better quality of public management
Weak « checks and balances » at all levels of government
Proximity between oil & gas major’s managers and the Government => economic and political goals can easily be confused
High level of corruption - more or less tolerated by the population

9. An illustration of the paternalistic style of government in Russia

10. Conclusion : how to exit from the rent-based growth model ?
Contradiction between institutional lock in and the instability of a rent-based growth model : how to solve it ?
Long term solution : exit from the current growth model by fostering industrial diversification
Short term solutions : exchange rate flexibility is not enough => capital controls ?

11. Thank you !
References :
Kudrin A., Gurvich E. (2014) : « A new Growth Model for the Russian Economy », Russian Journal of Economics 1 (2015),
Serra N., Stiglitz J. (Eds) (2008) : « The Washington consensus reconsidered. Toward a New Global Governance ». Oxford: Oxford University Press.
Rodrik D. (2008) : « A practical approach to formulating growth strategies », in Serra and Stiglitz (2008),
Vercueil (2010:2015) : « Les pays émergents. Brésil-Russie-Inde-Chine : mutations économiques, crises et nouveaux défis ». Paris : Bréal, (première édition 2010)
World Bank (2016) : « Russian Economic Report », n°36, November 2016.

12. A simple framework for analysing emerging growth models
including
INSTITUTIONAL CHANGE AND POLICIES
including
INSTITUTIONAL
FRAMEWORK
(and
macroeconomic
policies)
DEMAND-SIDE POLICY
ECONOMIC OPENING POLICIES
including
SUPPLY-SIDE POLICY
National
territory
Rest of the world
FOREIGN ENTREPRISES
INVESTMENT AND INCOME REDISTRIBUTION
CREATION AND RESTRUCTURING OF DOMESTIC FIRMS
SUPPLY
TYPE 1. EXTERNAL DEMAND DRIVEN GROWTH MODEL
TYPE 2. DOMESTIC DEMAND DRIVEN GROWTH MODEL
PRODUCTIVITY GROWTH
EXTERNAL DEMAND
PRODUCTION
GROWTH
DOMESTIC DEMAND
DEMAND
TYPE 3. RENT BASED GROWTH MODEL