Technology and Human Capital in an Economy Under Sanctions

Abstract

The article considers an abstract economy which has limited legal opportunities to modernize its technology. As technology and human capital interact, this limitation also impacts educational choices. Economic agents who are expecting a slowdown in technological modernization become less motivated to augment their human capital. Projecting that model onto Russia’s economy under sanctions indicates that the pace will slacken both in technological modernization and in the accumulation of human capital. As it is clearly too early to make predictions in granular detail regarding Russian industries, the article focusses instead on the country’s various regions. The theory of economic complexity is employed to calculate indexes reflecting the sophistication of the more complex regional industries and universities. The correlation between types of economic activity and university specialization at the regional level is also estimated. The conclusion is that regional economies featuring a more fully developed complex manufacturing sector also have a more developed university system as well as a tighter correlation between the structure of the economy and of the higher education system. These regions may be more affected by sanctions because it becomes more difficult for the modern technologies which are intensively used in complex industries to penetrate the Russian economy. To reduce the impact of restrictions on technological development and education, efforts should be made to restore the participation of Russian companies in global technology chains