Oil Windfalls and Regional Economic Performance in Russia

Abstract

I construct a novel dataset to investigate the effects of oil income in regions of Russia. My data combines regional level data on oil endowments and a wide range of economic series for 85 geographical regions of Russia. Focusing on exogenous oil windfall gains induced by movements in oil prices, I compare outcomes in oil endowed regions to outcomes in other areas. In doing so, I show that oil resources do not seem to benefit regional economic growth. Indeed, I provide evidence that oil windfalls lead to an expansion of the local public sector and a contraction of the private sector, resulting in lower profitability and a decline in economic growth. Overall, my results indicate that only a small share of revenues benefits the local population and that there are signs of missing money.