Economic development of border regions

(course: 5114119)

INTRODUCTION

Dmitry Zimindmitry.zimin@uef.fi

Different meanings of “development”

1. “Development” as a static situation on a fixed date – as a “level of development”;

2. “Development” as a dynamic process of change; it has some direction and speed.

What is “economic development”?• Economic development is an increase in

complexity (labour productivity) in the structure of production and of employment.

• Economic growth is not the same thing as economic development.

• Two key parameters of economic life: – Production /output (GDP = value added) and– Employment.

Economic development: in whose interest?

What is “a region”?There are several different meanings:• Supra-national (Macro-) regions;• Sub-national regions: regions within the same

state – its constitutive parts;• Trans-national (or “cross-border”) regions:

associations of sub-national regions belonging to different nation-states;

• Historical regions: an area characterized by distinctive historical features (ethnic, political, cultural, etc.). Example: Karelia

Theoretical background

• Adam Smith (1723-1790) and David Ricardo (1772-1823): free trade is mutually beneficial for all participants – ideology of globalization;

• Friedrich List (1789-1846): less developed coutries can benefit from protectionist measures (i.e. from economic borders).

• Today: Macro-regional economic blocs combine internal freedom of trade with external protectionism (e.g. EU, NAFTA).

Transparency – key characteristic of border regime

• To what extent do economic borders constitute a barrier for free movement of goods, services, money, people and intellectual property?

• High transparency leads to economic integration

• Border regimes are often asymmetric in terms of transparency

Levels of economic bordering:

• Corporate level: borders between enterprises (e.g. commercial secrets);

• State level: borders between states (e.g. customs regulations);

• Global level: borders between economic blocs (e.g. NAFTA, EU, ASEAN)

Elements of economic border regime:

• Foreign exchange controls, currency exchange rates;• Customs duties;• Import and export quotas;• Taxation (e.g. taxes on repatriation of profits);• Technical and other standards;• Immigration control;• Restrictions on residents/non-residents;• Physical border infrastructure (location of border

crossings);• Cultural barriers (e.g. foreign language).

Border-breaking practices:

• bilateral and multilateral integration arrangements (e.g. common market);

• special economic / customs zones;• cross-border subcontracting;• “teleworking”;• tax avoidance;• tax evasion (transfer pricing, double

invoicing);• smuggling.

Cross-border interaction dilemma:

• How to find a right balance between economic openness (integration) and economic protectionism (bordering)?

• On-going global economic crisis has stimulated re-bordering.

Regions are classified:

• In the EU: Nomenclature of territorial units for statistics (NUTS)

• In Russia: All-Russian Nomenclature of Administrative-Territorial Units (OKATO)

North Karelia: NUTS 4 and NUTS 5

Russian Karelia: sub-regions & municipalities

This course focuses on economic development of

sub-national regions situated along the Finnish-Russian border.

Lectures:1. Introduction – 21.10. (Dmitry Zimin – DZ)2. Human capital and social problems in

Russian border regions – 23.10. (DZ)3. Borders and economy – 28.10. (Heikki

Eskelinen)4. Cross-border co-operation instruments:

what they are and how they work – 30.10. (Matti Fritsch)

Lectures:

5. Economic geography of Russian border regions – 4.11. (DZ)

6. Finnish companies in Russian border regions – 6.11 (DZ)

7. Can we educate Russians in human resource management? – 11.11 (Markku Sippola)

in room AU1118. Russia – a tourist nation? – 13.11 (Antti

Honkanen)

Lectures:

9. The border as a factor influencing the development of the Finnish forest sector – 18.11 (Jakob Donner-Amnell)

10. Geopolitical aspects of Finnish-Russian interaction – 20.11. (DZ) in room AU111

* Written exam: 25.11, room M301* Re-sit exam: 9.12, room M301

Course-paper (optional, only for Master-degree

students – 2 credits)• Size: around 5000 words• You choose the topic: something on economic

development, business, trade, investments, tourism in Northwest Russia or Eastern Finland

• Deadline: 15 December 2013• Delivery: in electronic form (PDF or DOC) to:

dmitry.zimin@uef.fi