Natural resource extraction and economic diversification in Russian regions: Application of dynamic DID

Abstract

The abundance of natural resources can hinder economic diversification. Russia's heavy reliance on natural resources has not thoroughly been examined to determine whether a resource extraction boom promotes or stifles economic diversification. This study uses a dynamic DiD event approach to analyze panel data for 83 Russian regions over the 1996–2019 period. We compare regions with and without oil and gas extractions as the treatment and control groups to scrutinize the causal effect of these extractions on both trade and economic diversification. Our analysis reveals that natural gas extraction reduces trade concentration and slightly improves economic diversification, while oil extraction has an inconclusive causal effect on economic and trade diversification. Our findings have several policy implications.