Экономика региона (Mar 2020)
Inter-Regional Inflation Differential as a Consequence of Heterogeneity of the Russian Economic Space
Abstract
The need for the sustainable spatial development enables an analysis of the causes of the regional differentiation of consumer price growth rates for further development of relevant policies at the federal and regional levels. Therefore, the paper aims to examine how various supply and demand shocks in the tradable and non-tradable sectors as well as labour market imperfections influence price growth rates in the Russian regions. The considered regions are Sverdlovsk oblast and other regions of the Russian Federation (RF). Developing a regional model of general equilibrium contributes to the analyse. The model’s parameters were assessed using the Bayesian method based on the statistical data on the economies of Sverdlovsk oblast, other regions and the Russian Federation in general. Two types of models were considered, with flexible and rigid wages, indicating perfect and imperfect labour markets. The influence of supply and demand shocks in the tradable and non-tradable sectors on price growth rates in the considered regions was analysed using the impulse response functions and variance decompositions of endogenous variables. The study concludes that price growth rates in the regions differ mostly due to technological shocks in the non-tradable sector. The contribution of productivity shocks in the tradable sector to the inflation differential is limited, especial ly in the context of perfect labour mobility. Labour market imperfections cause an increase in the differentiation of consumer price growth rates in the regions. Moreover, this process is more pronounced in Sverdlovsk oblast and is typical for both tradable and non-tradable sectors and services. The study demonstrates the absence of the Balassa — Samuelson effect at the regional level. The findings can be used for elaboration of an effective regional policy of sustainable spatial development.
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