REGIONAL INEQUALITIES STILL GROWING.

The gap between Russia’s poorer and richer regions continued to increase last year, according to the deputy director of the All-Russian Living Standards Center, V. Litvinov. (Ekonomika i zhizn, No. 16, 1998, p. 29) Average money incomes across the country as a whole, adjusted for inflation, rose 3.5 percent between 1996 and 1997, Litvinov says, but this overall average increase conceals widening disparities between regions.

The disparities Litvinov refers to are not those between all Russian households–which increased sharply in the early 1990s but have, according to official data, been slowly declining since 1995. What Litvinov is concerned about are the disparities between Russian regions–that is, between the average incomes in the seventy-seven republics, krais and oblasts for which official data are collected. He cites statistics showing that the extent of differentiation across regions in average money income is wide, and has grown since 1994. He warns that this growing differentiation could threaten the unity of the Russian Federation.

It is not surprising that regional differences have continued to grow, given that a small number of regions, such as Moscow city and Samara Oblast, last year recorded quite strong growth of officially measured output, while output continued to fall elsewhere. Before too much is made of this as a potential source of political instability, however, two points are worth remembering.

First, many–perhaps most–of the poorer and economically more sluggish Russian regions have a larger share of rural population than their economically more successful neighbors. Litvinov’s Center has pointed out in the past that subsistence food production, which is not included in the data Litvinov cites, adds substantially more to the real incomes of rural dwellers than it does to those of urban residents, but goes unreported in the official statistics.

Second, differences across regions are much smaller than the inequalities between households across Russia as a whole. That is to say, there are large inequalities within each Russian region. As a result, inequalities between the regions (that is, between the average incomes in each region) account for well under half the overall inequality between Russian households.

It nonetheless remains the case that Russian policymakers face growing interregional inequalities. So far, the system of transfers from federal to regional budgets has had only the puniest success in reducing such disparities.

PROTECTION OF RUSSIAN AUTOMOBILE INDUSTRY COULD INCREASE FOREIGN INVESTMENT.