Economic complexity and income inequality in Russian regions

Abstract

Although economic growth leads to a reduction in poverty, the growing income inequality and its possible consequences are of some concern. The level of economic complexity has recently been increasingly viewed as an important predictor of income inequality. In this paper, using pool and models with time fixed effects, the impact of the economic complexity index on income inequality in Russian regions for 2013 and 2015 was estimated. The results of the evaluation of econometric models show that regions with more complex economies showed a higher level of income inequality compared to others. The explanations for the effect obtained include an increase in demand for highly qualified labor as a result of the development of high-tech industries and an increase in wage differentiation between high-skilled and low-skilled workers, as well as the migration of high-skilled workers to economically more complex regions. The main conclusion is that economic complexity is a significant factor of the variation in income inequality and should also be taken into account while conducting economic and social policy in Russian regions.