Testing empirically the determinants of intra-regional inequality in Russia, the authors seek to demonstrate that regions of the country where oil and gas are produced tend to experiment higher levels of income inequality. Endeavouring to identify the combination of geographic, economic and political phenomena that underlie this particular phenomenon, they argue that hydrocarbon rents has been providing big business with concentrated wealth used to derail the democratic processes initiated in the early 1990s. They also suggest that, contrary to initial expectations, the achievement of a high level of mutual integration between the local oil industry and local political élites has not been challenged by the recentralisation of power in the early 2000s: If local élites have been brought to give up their ambition at federal level, they are also becoming more protected from the potential local political competition. At the same time, state capture at the regional level remains correlated with weak entrepreneurship and low entry. This produces inequality as it closes some efficient channels to exit poverty. Some possible extensions of the analysis are suggested for other parts of the former USSR, notably for Kazakhstan from the viewpoint of inter and intraregional inequality associated with oil extraction.

The Redaction
CER: II-2.2-71