<%Language="VBScript" Response.Write "" %>
<%Language="VBScript" Response.Write "print" %>

Research Programs / Projects

Social Consequences of Russia's Joining the WTO

Head: Cand.Sc. L. Ovcharova

Duration: March 2002 - July 2003

Support: Ford Foundation grant # 1010-0462-1

Project participants: Dr.Sc. V. Rybalkin, Cand.Sc. N. Zubarevich, Dr.Sc. T. Chetvernina, A. Pishnyak, D. Popova.

Project partners: International Labor Organization Moscow Office, Center for Labor Market Research of the Institute of Economics, RAS, Center for Labor Market Research of the State University - Higher School of Economics, Department of Social Geography of the Moscow State University, Academy of Diplomacy of the Ministry of Foreign Affairs of the Russian Federation.

Research objective is to identify possible moments of tension that Russia's joining the WTO might engender. The following activities were undertaken: (1) a macroeconomic analysis of the key economic and social aspects of Russia's joining the WTO; (2) an identification of possible regional disproportions engendered by Russia's joining the WTO; (3) an evaluation of social consequences for the households.

Main results:

1. The Russia's coming joining the WTO can hardly be regarded as a more influential upheaval than the dramatic changes of the beginning of the 1990s - the systemic crisis and Russia's entering the global market accompanied by a severest decline of production, first of all in the non-competitive sectors of manufacturing industry and agriculture. Another decline of such a scale is quite improbable now.



2. Our macroeconomic analysis has shown that negative social consequences might be brought first of all by the restructuring of the labor market and an increased growth of prices for energy resources. It is unlikely that Russia's joining the WTO would lead to a significant growth of unemployment. However, the risk industries are localized in several regions for which they are the main areas of specialization. The degree of localization is especially high in the automobile industry: more than 80 per cent of Russian automobiles are produced in two subjects of the Russian Federation. In the textile industry, three subjects cover 65 per cent of the total production. The overwhelming majority of banking and insurance companies are concentrated in Moscow. Even in such a territorially deconcentrated industry as cattle breeding, over one third of meat production belongs to ten subjects of the Russian Federation. The implication of it is that social consequences of Russia's joining the WTO can be very different for different regions.



3. Seeking to forecast the possible regional disproportions resulting from Russia's joining the WTO, we worked out a typology of regions based on the probability of negative social consequences for them. The following factors were taken into consideration:
   
   
   • the level of economic development of the region;
   • the degree of the 'openness' of the economy;
   • diversification of the economy;
   • the role of the largest enterprises for the income of regional and local budgets;
   • small business development;
   • the condition of the consumer market, and the level of income of the population;
   • the quality of the economically active population;
   • the settling factor (as a dense network of cities and intra-agglomeration ties increase of the chances of employment).
   
   On the basis of the territorial analysis of these factors, five types of problem regions were singled out:
   
   
   1. Relatively well developed machine-building regions with industrial employment and generally favorable conditions for the development of small business (the Samara, Nizhni Novgorod, Moscow, Novosibirsk, Ulyanovsk, Orel, Tver, Kaluga, Vladimir regions, and the Khabarovsk Territory);
   
   
   
   2. Less developed regions with mixed specialization and employment (the Pskov, Bryansk, Tambov, Voronezh, Rostov regions, the Mordovia Republic, the Mari El Republic, the Chuvash Republic, the Kurgan and Penza regions);
   
   
   
   3. Less developed regions with the specialization on food industry and prevalence of agricultural employment (the Krasnodar and Altai Territories, the Kabardino-Balkaria Republic, the Adygea Republic);
   
   
   
   4. A depressive region with the textile specialization and a high level of industrial employment (the Ivanovo region);
   
   
   
   5. The least developed agricultural regions with acute social problems (the Karachaevo-Cherkessia Republic, the Dagestan Republic, the Ingushetia Republic, the Kalmykia Republic, the Altai Republic, the Tyva Republic).
   
   

   The last two groups practically have no internal resources, a mobilization of which would compensate for probable tensions in the labor market engendered by Russia's joining the WTO.

4. At the household level, the tension would be associated primarily with the growth of prices for energy resources. According to our forecasts, the fivefold growth of prices for housing and communal services by 2007, would lead to a situation when 30-40 per cent of Russian households would not be able to pay for them. Lonely pensioners and families with children would be in a most vulnerable position.

Our models describing what consequences the growth of prices for energy resources would have for households, allowed to measure the costs associated with transferring the population's rent from low prices for housing and communal services into other sources of income. The rules of the formation of wages, pensions, and social benefits differ significantly from the existing rules of the distribution of the rent from the low prices for housing and communal services. Therefore, to compensate for the losses the households with two working members and two children would have from the growth of prices for energy resources, the amount of money allocated to the wage fund needs to be 1.5 times greater than the general fund of the growth of prices for housing and communal services. Given such a scenario, the growth of pensions would compensate only for 30 per cent of the growth of prices. Presumably, the remaining 70 per cent would be compensated through the system of housing subsidies. Generally, for 41 per cent of the households such a scheme would mean a compensation lower than the losses from the growth of prices for energy resources, and with 59 per cent of the households, income would outweigh losses.

The results of the project were presented at a meeting of the Russian-Finnish Inter-Government Group in Helsinki (September 2002) and the IISP conference. Twice materials were prepared for the TV program Big Money (March 2002). It is planned to publish the project results in the IISP Working Papers Series.