‘To Cooperate and Exchange Knowledge’: First Sino-Russian Economic Cooperation Workshop—Economic Performance from Regional Aspects

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The HSE Faculty of Economic Sciences and the School of Economics at Shanghai University have co-organised the First Sino-Russian Workshop on ‘Economic Performance from Regional Aspects’. The researchers discussed how they detected and assessed the effects of different economic policies in Russia and China at a regional level. There were more than 200 attendees who registered and attended the meeting. The 1st Sino-Russian Economic Cooperation Workshop started online on November 5, 2022, at exactly 10 a.m. Moscow time. Both universities contributed significantly to making it happen.

Prof. Mao Yanbing, the head of the Foreign Affairs Department at Shanghai University, launched the workshop with great euphoria for commencing such an educative and impactful workshop. He greeted and welcomed all participants and introduced the distinguished guests and speakers. Among those present were Prof. Dr. Dmitry A. Veselov, Faculty of Economic Sciences Deputy Dean for Research, HSE, Ms. Oxana P. Budjko, the Head of the Faculty of Economic Science International Office, Associate Prof. Dr. Demidova Olga, HSE, Prof. Dr. Nie Yongyou, Deputy Dean of the School of Economics at SHU, Prof. Josu, SHU, and Prof. Dr. Xu Lingli, SHU.

In his opening remarks, Prof. Dr. Dmitry A. Veselov, the Deputy Dean for Research at the Faculty of Economics Sciences, explained the significance of the workshop and the significance of the topic "Economic Performance from Regional Aspects" for both China and Russia. He underlined that the Russian Сentral Bank estabilished a team to study this topic because of its relevance, thus it is highly beneficial for both parties to share scholarly ideals through this collaboration. The Faculty of Economics Science (HSE), has made significant contributions to research over the years, which he also noted. He asserted that "Our researchers have an extensive network of research groups in a variety of economic sciences. The faculty, students, researchers, and the world will all benefit from the scientific collaboration between HSE and Shanghai University.

'In order to conduct projects as well as teaching, learning, and research activities, the two universities first inked an academic exchange agreement in May 2021. When this is put into practice, it provides academics on both sides with a valuable link for academic cooperation, which is crucial for both sides. Despite the challenges the pandemic's spread has created, our bilateral collaboration cannot be stopped. Additionally, this collaboration will strengthen the ties of friendship and mutual trust between China and Russia" - said the SHU School of Economics' vice dean, Prof. Dr. Nie Yongyou. He finished his remarks by wishing the speakers luck and a long-lasting working cooperation..

Shanghai, China

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Shanghai University (SHU) was founded in 1922. In 1994, it merged with Shanghai University of Technology, Shanghai University of Science & Technology, and Shanghai Science & Technology College. There are over 50,000 students at the university, and the School of Economics is one of 29 independent university departments.

The partnership between the HSE Faculty of Economic Sciences and the SHU School of Economics began in 2021 with a student exchange agreement.

The Centre for Spatial Econometrics in Applied Macroeconomic Research at HSE University headed by Olga Demidova participated in the workshop. This Centre analyses macroeconomic shocks at regional levels in Russia.

For China, regional analysis is also relevant: the country’s regions are heterogeneous and may experience different shocks. China’s experience might prove to be extremely useful, particularly in terms of meeting new challenges posed by COVID-19. ‘Since these viruses arrived in China earlier, we can use its experience of imposing strict limitations to forecast the possible impact on Russia’, said Olga Demidova.

From Healthcare Costs to Coronacrisis

Artem Demyanenko, lecturer and PhD student at the HSE Department of Applied Economics, spoke on ‘The impact of public health spending on economic growth in Russia: a regional aspect’. He found that, along with increased life expectancy and human capital development, an increase in the share of government spending on healthcare in GRP can stimulate economic growth in a region and alleviate the negative economic effects of pandemics.

Olga Demidova, analysed the changes in the consumption structure of Russian households during and after COVID epidemic from a regional perspective. The study found that those regions with medium and strict quarantine measures did not differ in the structure of consumption of goods and services, while in regions with less strict quarantine measures, the share of spending on food was lower, and on non-food products higher.

China: Subjective Health and Common Prosperity

Xu Lingli from SHU spoke on long-term care insurance, and the physical and mental health of the elderly in China. China has the world’s largest elderly population over 65, accounting for 23.34% of the world’s elderly, according to data from the country's 7th census. As part of its policy on aging, China launched the ‘Healthy China’ campaign and implemented long-term care insurance (LTCI). The study found that LTCI had a considerable favourable impact on the subjective health of the elderly. LTCI is more effective for males and those and with low income, although it can have a negative impact on their families' welfare.

Common prosperity is the number one public goal in China. But it is achievable only if the regional developmental gap is closed, believes Zou Weiyong, PhD Student of SHU, who analysed regional differences and common prosperity in China.

Inequality and Monetary Policy

Valeria Zvereva, Visiting Lecturer at the HSE Department of Theoretical Economics, analysed the effect of inequality on the effectiveness of the interest rate channel of the transmission mechanism of the monetary policy of the Central Bank of the Russian Federation. She found that regions with a higher level of inequality demonstrate a stronger response to monetary policy measures.

Bai Ruisi, a postgraduate Student at SHU, looked at how regional trade agreements (RTAs) affect exports. She found that a reduction in import costs brought about by RTAs encourages an improvement in the quality of the contracting parties' exports through technology spillover channels.

The workshop participants decided to continue their cooperation and carry out more academic workshops. ‘At the end of the workshop, I suggested that our Chinese peers carry out a comparative analysis of the changes in the structure of household consumption in different regions of China and Russia’, said Olga Demidova.

‘I would like to emphasise the interesting format of this workshop. Here, master’s students, PhD students and leading researchers from partner universities have all been able to have their say. This means it has given early-career researchers valuable experience of public speaking at an international event’, Dmitry Veselov concluded.

Shanghai, China

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In her closing remarks, Oxana P. Budjko, the Head of Faculty of Economic Science International Office, expressed her hope to continue cooperation. 

The workshop moderator Professor Mao Yanbing  concluded by expressing his hope that numerous workshops of this nature would be held in the days to come in order to ensure the ongoing exchange of ideas between these two universities, and in person visits will become possible.

Special thanks to Ms. Tianjiao Sun from the International Affairs Office, School of Economics Shanghai University for her endless efforts in organising the workshop. 

Research covered in the workshop

Presenter: Ms. Zvereva Valeria, Postgraduate Student of HSE. Topic: The Effect of the Level of Inequality on the Effectiveness of the Interest Rate Channel of the Transmission Mechanism of the Monetary Policy of the Central Bank of the Russian Federation.

Main idea. The study tries to identify appropriate clusters that will be more or less sensitive to monetary policy measures depending on regional inequality and to help determine how the degree of inequality affects the transmission mechanism of monetary policy for the Russian economy.

How many questions the study seeks to answer is: how do inequality and the level of inequality distort - strengthen or weaken - the transmission channels of monetary policy and affect the possibilities of demand management, respectively? 

The relevance of this study lies in the need to determine the impact of the level of inequality on the transmission mechanism of monetary policy of the Russian economy, taking into account regional specifics and identifying appropriate clusters with greater and lesser sensitivity to monetary policy measures depending on regional inequality

Context. The growing polarization of wages is reflected in the general trend of rising inequality in developed nations. Publications of Russian researchers account for less than 5% of the total volume, according to Scopus, which indicates a low degree of study of the impact of inequality on the effectiveness of monetary policy within Russia. Numerous regions of Russia were identified as having sufficiently high levels of inequality over the time period under study, as determined by calculations of the average values of the Gini coefficient and the funds coefficient. As a result, it is necessary to investigate how sensitive these regions are to monetary policy measures and test the hypothesis that there are statistically significant differences between the effects of monetary policy on regions with high and low levels of inequality.

Findings 

1. The strength and duration of the impact of various monetary policy measures of the Central Bank largely depend on the structure of the region's economy, presented in the framework of the current study using various transmission mechanism channels, as well as on the factor of regional inequality, which confirms the expediency of further study of asymmetry in the issue of work monetary policy and its relationship to inequality

2. Inequality continues to be a significant factor in the regional asymmetry of the response to monetary policy. The impact of monetary policy measures is statistically significant with a lag of one quarter, both before and after the introduction of the inflation targeting regime.

3. There is a tendency in the low-inequality group to reduce the percentage of construction, trade, and net exports in GRP, as well as SMEs in the economy which suggests a reduction in sensitivity to monetary policy measures represented by interest rate channels.

4. Regions with a higher level of inequality demonstrate a stronger response to monetary policy measures, different from clusters with medium and low levels of inequality. At the same time, the level of inequality in the region should be quite high.

Conclusion. The strength and duration of the impact of various monetary policy measures of the Central Bank largely depend on the structure of the region's economy, presented in the framework of the current study. It was possible to establish an empirical relationship between the level of regional inequality and the work done by the transmission mechanism of monetary policy in Russia. 

Presenter: Ms. Bai Ruisi, Postgraduate Student of SHU. Topic: RTAs and the Quality Upgrading of Export Product:Mechanism and Effects. Rarely does the current literature look at how RTAs affect the caliber of export goods. The effect and mechanism of RTAs on promoting the quality upgrading of export products are empirically tested in this paper using the RTA implementation profile of 114 economies and trade data at the exporter-product-importer-year level.

Main idea. This paper uses the RTA implementation profile of 114 economies and the trade data at the exporter-product-importer-year level to empirically test the effect and mechanism of RTAs on export quality.

This study compares the effectiveness of RTAs across various product categories and performs a robustness test using the Heckman two-stage estimation method.

Context. Since multilateral trade liberalization negotiations under the WTO framework have been blocked, most countries have turned to establishing regional trade agreements (RTAs) RTAs have lowered trade barriers between the contracting parties and significantly promoted their exports. So, while promoting the increase of trade volume, do RTAs promote the upgrading of the quality of export products? The discussion of this matter will help us comprehend the crucial role that RTAs play and further the theoretical and empirical findings in this area.

Findings 

1. Study finds that RTAs significantly promoted the quality of export products of the contracting parties. And the conclusion is still valid after the robustness tests of measurement error, endogenous error and sample selection error.

2. The results of the mechanism test demonstrate that the reduction in import costs brought about by RTAs primarily encourages the quality improvement of the contracting parties' export products through technology spillover channels.

Presenter: Mr. Demyanenko Artem, PhD Student of HSE. Topic: The impact of public health spending on economic growth in Russia: a regional aspect.

Main idea. The purpose of this paper was to determine the optimal level of government expenditures on healthcare that provides the greatest impact on the economic growth rate in Russian regions. 

Context. Increased healthcare spending is said to increase the size and quality of the labor force, resulting in increased productivity and output per worker. This boosts consumer spending and firm earnings, resulting in a multiplicative effect on GDP growth. Several studies have found that increasing healthcare spending stimulates GDP growth through a variety of channels. Previous research demonstrated that relation between healthcare expenditures and GDP is nonlinear in OECD countries. The purpose of this paper is to test the similar hypothesis and find the optimal share of healthcare expenditures in gross regional product for Russian regions by using spatial Durbin model.  

Findings 

1. An increase in the share of government spending on healthcare and sports in GRP can stimulate economic growth in the region and the optimal share of government expenditures on healthcare and sports in GRP is 5.9%.

2. An analysis of regional data showed that regions differ greatly in the amount of spending on healthcare and sports and in its share in GRP. In most regions, this proportion has not exceeded 3% in the last 15 years and has declined since 2012, which is significantly lower than the estimated optimum. 

Conclusion  

The research showed that additional government investments in healthcare can provide a significant stimulus to the economy of Russian regions. Estimation of the model without spatial effects yielded an optimal share of government expenditures on healthcare in GRP equal to 6.4%. However, with the assumption of spatial interdependence between regions, it is now possible to consider the impact of health investment in one region on its neighbors, allowing the average optimal share of health and sport expenditure in GRP to be reduced from 6.4% to 5.9%.

Presenter: Mr. Zou Weiyong, PhD Student of SHU. Topic: Regional Differences and Dynamic Evolution of Common Prosperity in China.

Main idea. In this paper, the unquantifiable indicators such as middle-income groups and people's happiness in the previous studies are removed. More emphasis is placed on the common, shared, fair and other elements in the quantification process. Using the objective entropy method, this paper calculates the common prosperity index of panel data of 31 provinces in China from 2000 to 2019 by taking the six regions of China as the standard of geographical space division.

Context. Common prosperity carries the long cherished wish of every generation of the Communist Party of China and embodies the common expectations of every Chinese people. Common prosperity is advancing rapidly, but the gap between the rich and the poor, fairness and efficiency and other issues are increasingly worth examining.

Findings 

1. According to our research, Beijing and Shanghai are leading regions of common prosperity.

2. Regional differences have emerged as the primary source of the overall disparity in national common prosperity in China.

3. The main peak position of the distribution curve of the national common prosperity index is moving to the right, indicating that the country's economic development is constantly improving, according to Kernel density estimation.

Conclusion  

The development of common prosperity in China is relatively stable and has a strong time continuity. The stability of different regions in different types of shared prosperity levels is different. There is no jump across common prosperity levels, and the stability of different regions in different types of common prosperity levels is different.

The government needs to deepen the reform of the income distribution system to increase the income of urban and rural residents. Adhere to the distribution system of taking distribution according to work as the main body and coexistence of multiple distribution methods. We should give full play to the comparative advantages of various regions and close the regional development gap.

Presenter: Associate Prof. Dr. Demidova Olga, NRU HSE. Topic: Changes in the consumption structure of Russian households during and after COVID epidemic: regional aspects

Main idea. To analyze and understand the structure of consumer spending following the COVID-19 pandemic, as well as the impact of inflation in Russia.

Context. The purpose of this study is to determine how much the structure of household consumption in Russia has changed in 2020, the period of the Covid pandemic, compared to the previous year. And whether this structure returned to the previous one in 2021. The relevance of the study is due to the following reasons: 1) the crisis caused by the Covid pandemic was quite different from previous crises (1998, 2008, 2014), so the response of households to this crisis may be different , 2) understanding the structure of consumer spending is very important for calculating the inflation.

Findings 

1. Although nominal consumption expenditure per capita increased in both 2020 and 2021, real incomes decreased in 2020.

2. The share of expenditures on food increased in 2020, remained unchanged in 2021, the share of expenditures on alcohol did not change in 2020, and decreased in 2021. The share of spending on non-food items increased in 2020, but fell again in 2021, returning to the share of 2019. The share of spending on services decreased in 2020, slightly increased in 2021, but did not reach the level of 2019.

3. The situation in the regions was quite different, so in the study they were divided into two groups. In the first group of 31 regions, real average per capita expenditure increased (from 4% to 33%), in the second group of 54 regions, real average per capita expenditure decreased (from 0.7 to 25%). In the first group of regions, with the growth of total expenditures, the share of expenditures on products and services decreased (in the second group of regions, too, and more strongly), the share of expenditures on non-food products increased (again, stronger in the second group), and the share of expenditures on alcohol increased (while in the second group, this share is decreasing). Regions with medium and strict quarantine measures did not differ in the structure of consumption of goods and services, while in regions with soft quarantine measures, the share of spending on food was lower, and on non-food products more. 

Conclusion. It was partially proven that "changes in the structure of spending are reliant on the rigidity of limitations during the epidemic." There were no variations in the structure of consumer spending between hard and medium quarantine zones. The proportion of spending on non-food products was higher, as was the proportion of spending on communication services.

It was also partially confirmed that the structure of expenditures does not vary in the same way in regions with increasing and regions with decreased consumption expenditures.

Presenter: Prof. Dr. Xu Lingli, SHU. Topic: Long-term care insurance, physical and mental health of the elderly and welfare spillovers

Main idea. The study employs the difference-in-differences technique to investigate the impact of LTCI on physical and mental health in China based on the first LTCI pilots conducted between 2015 and 2017. We investigate not just subjective but also objective health.

Context. A rapidly aging population has become a global concern, increasing demand for care services, healthcare, and imposing significant financial constraints. China has the largest elderly population over 65, accounting for 23.34% in the world, according to the country's 7th census data. As part of its anti-aging policy, China launched the "Healthy China" campaign and implemented long-term care insurance (LTCI). There is little understanding of the LTCI in China because of its short implementation time and the high cost of health care for elderly people in the country. 

Findings. The study found that LTCI had a considerable favorable impact on the subjective health of the elderly. LTCI improves the objective health of people who have difficulty doing ADLs. LTCI is more effective for men and persons with low income. LTCI has a negative impact on their families' welfare.

Conclusion. We use the difference-in-differences method to study the impact of LTCI in China on the physical and mental health. The entropy weight method is used to construct objective health index to reflect health more accurately. We also study the spillover effects on care burden and child employment.

Shanghai, China

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