The emerging economy of Russia and effects of international factor movements.

As an introduction, Carbaugh (2010) states that, “The economic forces underlying the international movement of factors of production are virtually identical to those underlying the international flow of goods and services. Productive factors move, when they are permitted to, from nations where they are abundant (low productivity) to nations where they are scarce (high productivity). Productive factors flow in response to differences in returns (such as wages and yields on capital) as long as these are large enough to more than outweigh the cost of moving from one country to another.”

Below are some general facts of Russia provided by Migration Information Source

Population: ……………………………  140,702,096 (July 2008 est.)

Population growth rate:………………..   -0.474% (2008 est.)

Birth Rate:……………………………..  11.03 births/ 1,000 population (2008 est.)

Death Rate:…………………………....  16.06 deaths / 1000 population (2008 est.)

Net Migration Rate:……………………  0.28 migrants / 1000 population (2008 est.)

Ethnic groups:…………………………   Russian 79.8%, Tatar 3.8%, Ukrainian 3%,

                                                                Bashkir 1.2%, Chuvash 1.1%, other or 

                                                                unspecified 12.1% (2002 census)

The Russian Federation is the largest country in physical terms, with nearly twice the territory of Canada and the United States.  It shares a land border with 14 countries and requires 450 different official border crossing points.  The official currency is the Russian Ruble, which is one of the world’s oldest currencies. The currency has had its high and lows, but grew steadily after the authorities announced that they would no longer allow independent countries to print Russian national currency.  However, once the Asian financial crises his Russia in the 1998 the value of the ruble dropped.  Today 1 USD is equal to 29.36 rubles.

According to Nation Branding & Investment, Russia has a market economy with enormous natural resources, predominantly oil and natural gas. It has the 10^th largest economy in the world by nominal GDP and the 6^th largest by purchasing power parity.  More recently, higher domestic consumptions and greater political stability have strengthened economic growth. In 2002-2003, as fuel prices rose, FDI flows into Russia increased tenfold over time due higher profit results, and Russia became one of the top countries in the world for inward FDI. Russia’s main focus now is on the quality of long-term investments to ensure that technology and innovations flow into the country, along with capital, modern-production facilities, and the creation of jobs.

It is often argued that migration is needed in order for Russia to maintain growth and stability. Due to Russia’s higher death rate, than that of births as listed above, without immigration it would be necessary to raise the retirement age to 73, however the life expectancy for men and women combined is only 65.

Beginning is 1993 Russia also began its accession to the WTO.  This is a process that may be used as an important tool for economic development.  WTO accession will impact a wide range of policies and institutions, including tariff policy, customs administration standards, rights of foreign investors, agricultural policy, intellectual property and possibly government procurement.  Russia has negotiated most favored nation status or better with all its significant trading partners.  I look forward to seeing Russia’s growth and international economic continuations in the near future.