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Human Capital and Knowledge-Intensive Industries Location: Evidence from Soviet Legacy in Russia

  • Denis Ivanov (a1)

Do human capital endowments trump location for knowledge-intensive industries? This article takes advantage of a natural experiment created by the end of the Soviet planned economy in 1991, which had geographically distributed R&D manpower according to planned needs as opposed to a distribution determined by a market economy. It examines the extent to which the planned economy created a path-dependence in the location of post-Soviet human-capital intensive production. The study finds that regions with more R&D personnel in 1991 did better in the development of modern market-oriented knowledge-intensive business services, like engineering and IT. Several explanations are offered for this path-dependence, with an emphasis on human capital externalities being the most plausible.

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This article was prepared within the framework of the Basic Research Program at the National Research University Higher School of Economics (HSE) and supported within the framework of a subsidy granted to the HSE by the Government of the Russian Federation for the implementation of the Global Competitiveness Program.

Alexei Faddeev, Victoria Golikova and Tatiana Mikhailova kindly provided necessary data for the article. I am grateful to Kristian Behrens, Tatiana Dolgopyatova, Vladimir Gimpelson, Philip Keefer, Boris Kuznetsov, John V.C. Nye, Alexey Oshchepkov, Koen Schoors, Alex Teytelboym, Ilya Voskoboynikov, Andrei Yakovlev, and Natalia Zubarevich for their helpful comments. The article was significantly improved by the suggestions of Ann M. Carlos and three anonymous referees. An early version of this paper was presented at the research seminars at the HSE, as well as at 54th European Regional Science Association Congress and 3rd International conference “Industrial Organization and Spatial Economics” under the title “Transition and Path-Dependence in Knowledge-Intensive Industry Location: Case of the Russian Professional Services.”

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