Kaldor's Laws and Spatial Dependence: Evidence for the Russian Regions

The aim of the research is to test whether the manufacturing sector is an engine of the economic growth in the case of Russia by analyzing the context of Kaldor’s laws. In this paper the examination of three postulates that correspond to these laws, using the spatial data of 80 Russian regions from 2001 to 2011, is provided. Moreover, for this purpose the spatial econometric approach was applied, methods of which are developing and commonly used by a great range of researchers. Also, models of Kaldor’s laws were extended by control variables and made more complex by adding panel data effects. As for results, in this study I have found that all three Kaldor’s laws hold true, and the manufacturing plays a sufficient role in a Russian economy. Particularly, SAR, SEM and SARAR models with random and fixed effects were run and coefficients of main independent variables in all models were positive and significant. Overall, as the results show that Kaldor’s laws are consistent, it is better for politicians to consider the manufacturing and spatial dependencies as critical factors of the heterogeneity among regions. Keywords: Kaldor’s laws, spatial econometric approach, Russian regions