Spillover effects of the Russian economy: Regional specificity

The purpose of the study is to evaluate the strength and direction of the distribution of the foreign direct investments (FDI) in regional economy. The subject matter of the research is FDI to the regions of Russia. The subject of the study is relevant as it makes possible to estimate the long-term consequences from the restrictions of the West countries (in connection with sanctions) against the inflow of the foreign capital to the regions of the Russian Federation. The study is based on the following hypotheses: 1. Russian regional economy has horizontal (distribution of effects from FDI within an industry) and vertical spillover effects (distribution according to a technological chain, from product suppliers to product consumers). Vertical effects are more important and have greater amplitude than horizontal effects. An industry competition is one of the causes of negative horizontal spillover effect, and the scale of the company is the reason of positive horizontal spillover effect. 2. FDI generates the positive regional spillover effects on the productivity of domestic firms in the Russian economy. 3. Regional industry specificity influences the sign and magnitude of spillovers from FDI. 4. Time sensitivity is revealed for horizontal spillovers, so the regional effects may change the direction. As an empirical basis of the study, the statements of 23567 Russian companies with FDI and 25354 Russian enterprises without FDI for the 5 years were used. The methodology of the research is the calculation of spillover effects, Cobb-Douglas production function and panel data regression. The study has found, that the direct vertical spillover effects are almost absent. That means that industrial consumers do not notice the effect of inward FDI. At the same time, the converse effect related to the product suppliers is positive, but as the direct effect, it is not more important in any group of regions then the horizontal effect. The Russian economy has a positive regional spillover effect of FDI. The positive effect of FDI for a region of investment attractiveness, first of all, extends to regions with similar investment climate, and after that residually extends to less successful regions. The regional spillover effect is unstable and has high volatility. Therefore, regional administration has to develop the anti-crisis policy and try to improve the investment climate. The findings of the study may be useful for the regional authorities to formulate the investment policy.Освещены основные методы оценки эффективности притока прямых иностранных инвестиций на основе спилловер-эффектов. Особое внимание было уделено региональному спилловер-эффекту. Представлены причины появления горизонтальных спилловер-эффектов. Выявлено, что прямой вертикальный эффект практически отсутствует.The article has been prepared with the support of the Grant of Russian Humanitarian Science Foundation. 15-02-00622