Taxation of natural resources and economic growth in Russia's regions

- We examine regional growth in Russia since the introduction of the mineral tax in 2002.
- Non-hydrocarbon producing regions grew slightly faster than other regions during 2002-2011.
- Hydrocarbon-producing regions did not grow faster than other regions between 2002 and 2011.
- Mineral-rich regions preserved their pre-2002 natural resource rents.
- Our conclusion is that the central government taxed away incremental hydrocarbon rents between 2002 and 2011.

We examine the impact of natural resources on economic growth in Russia's regions since the introduction of the mineral tax in 2002. Using novel measures of regional natural resource rents (mineral tax collections), we demonstrate that non-hydrocarbon wealth has had a slightly positive and hydrocarbon wealth has had no to a slightly negative effect on regional growth since 2002, although mineral-rich regions are richer than other regions. The absence of significant growth benefits to resource-endowed regions is at odds with the beneficial impact of natural resources, and particularly hydrocarbons, on the growth of the country as a whole. We discuss the reasons for this outcome and conclude that the central government was successful in taxing away incremental regional resource rents during 2002-2011, while preserving the pre-2002 regional rents.