Does the share of crude petroleum and natural gas in exports increase total exports? the Russian case

Abstract

The paper studies how export performance is influenced by export composition. The empirical literature claims that higher shares of high technology exports is positively linked to total exports, because they are high added value goods and the demand is inelastic. Subsequently, the composition of exports matters in explaining export performance. This research tested the association between exports of crude petroleum and natural gas and total exports in a bilateral framework for the Russian case. Oil and gas are key Russian export products, and it is well known that the demand for these products is inelastic. Accordingly, using dynamic panel data models it was found that a higher share of crude petroleum and natural gas in total exports is positively related to total bilateral exports. However, this effect is mainly a result of indirect effects of export composition on income and price elasticities. This finding can lead to a better understanding of the Russian persistent surplus in both trade and current accounts and of the most appropriate policies for managing external imbalances.