Modeling Russian regional economic ripple effects of the oil and gas industry: Case study of the republic of Komi

Petroleum extraction influences local communities both adversely and positively. Adverse effects include environmental degradation and crowding out of traditional industries. On the other hand, petroleum activity normally increases employment: directly in the petroleum industry, in the service and s...

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Bibliographic Details
Published in:Regional research of Russia 2015-04, Vol.5 (2), p.109-121
Main Author: Fjærtoft, Daniel Buikema
Format: Article
Language:English
Subjects:
Economics
Economics and Finance
Regional Development
Regional/Spatial Science
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Summary:Petroleum extraction influences local communities both adversely and positively. Adverse effects include environmental degradation and crowding out of traditional industries. On the other hand, petroleum activity normally increases employment: directly in the petroleum industry, in the service and supply industry and through multiplier effects stemming both from secondary industries and increased purchasing power. This article investigates regional ripple effects from oil and gas production in the Komi Republic by building a purpose-made input-output model for both the Russian national and Komi regional economies. Model findings are compared with results from similar analyses in Norway. The model shows the importance of taxation as channel for economic ripple effects from the oil and gas industry. A limited industrial base in Komi and high integration between the Komi and the wider Russian economy makes taxation even more important for ripple effects at the regional level. Adjusting regional petroleum taxation coefficient to match actual Russian practice shows that the federal collection of the mineral extraction tax substantially limits regional benefit from the oil and gas industry. Compared to estimates and findings in Norwegian literature on regional ripple effects of the petroleum industry, this article concludes that although both peripheral Norwegian regions and Komi have common challenges relating to regional industrial capacity, regional ripple effects in Norway are more pronounced. The article has been supported by the Norwegian Research Council’s NORRUSS program through the ARCTIC CSR project.
ISSN:2079-9705
2079-9713
DOI:10.1134/S2079970515020033