Comparative Research of Internal and Border Regions

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1		Galina Anatolievna Khmeleva	--	2690	2023-12-25 10:12:52	\|
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This entry is adapted from the peer-reviewed paper 10.3390/economies11030089

The differentiation in the development of regions remains a major challenge for the working out-of-state industrial and regional policies aimed at balanced and sustainable development. In theory, regional differences between internal and border regions can be explained by differences in natural resources, and economic and industrial potential, as well as by the existence of external boundaries. Border regions have higher risks in ensuring the geo-political sustainability of an industry. External boundaries, as well as differences in industry dynamics between regions, cycle stages, and industry trends, are often overlooked in industrial policy making, which in itself can be a factor of volatility.

industry cycle internal regions border regions cyclical dynamics cycle

1. Introduction

Current regional development and industrial policies focus our attention on efforts to reduce regional imbalances through “smart specialization” based on job growth and wealth creation. In doing so, national well-being can only be achieved through the full realization of the economic potential of all regions (Mustafin et al. 2022). However, the question of economic inclusion cannot be fully addressed without taking into account such specific factors as the existence of borders (McCallum 1995) and the cyclicality of the economy (Sohn 2014).

Due to the popular opinion on the presence of “border effects” (McCallum 1995), the peripheral geographical position of border regions and, as a consequence, their backwardness in socio-economic development from the “mainland” part of the country in most countries (Fernandes 2019), the research of border territories in regional studies is a promising exercise for analysis aimed at the identification of specific characteristics in the development of border regions and their role in the balanced and sustainable development of a country, based on a comparative analysis of border and interior regions. Since the volatility and evolutionary nature of the economy are inherent features of a region’s economic system (Tikhomirova 2006), such characteristics will allow a deeper study of the causes of the unsustainable behavior of the system and more adequate industrial policies and regional development.

2. Border Regions as an Object of Regional Analysis

In the academic literature, the solution to the question of the specific characteristics of the border region begins with the definition of this type of territory. Thus, within the framework of the territorial approach (Baklanov 2018; Bilchak and Bilchak 2018), the border region is an integral geographical territory located in close proximity to the borderline of a foreign state.

Despite the fact that the regions in the strict sense are considered the subjects of the Russian Federation in Russia, and territories of the NUTS2 level in the EU, the territorial approach to the border regions considers them to be smaller Russian border municipalities (Lazareva et al. 2020) and NUTS3-level territories located next to a border, borderlands (Svensson 2022) in EU policy and practice. However, this approach is difficult in that it is not possible to specify clearly the parameters by which the immediate border zone can be defined (Berezhnaya 2021). However, such an approach, complemented by a functional approach, turns out to be effective in the public management practice: so, cross-border functional areas, being spatially specific territorial complexes, located on two (or more) sides of a state border(s) that is not defined by administrative borders but by cross-border functional linkage (Jakubowski et al. 2022), can become an important object of management within the policy of border cooperation of a single state or neighboring states.

The second important approach to border regions is a regional approach, where specific regions become border ones, depending on the existing regional hierarchy, if they have a common borderline with foreign states (Angapova 2014).

In regional studies, the study of the specificity of border regions as a whole is connected with the identification of the economic consequences of borders between neighboring sovereign states, which can act as a barrier (Leick et al. 2021) to regional economic development, as well as a resource (Sohn 2014; Kurnikova 2021) promoting such a development. At the same time, the economic integration of neighboring countries does not offset the asymmetries of borders, expressed in price differences and differences in factor costs, for example, on the US–Mexican (Anderson and Gerber 2020), Norwegian–Swedish (Leick et al. 2021) and Chinese–Hong Kong (Chandra et al. 2022) borders.

The question of the influence of national boundaries on the development of regions has long fascinated scientists of different countries. However, not only academic interest but also policy attention to border regions generated the impetus for the development of regionalism after World War II in Europe. From that moment on, the view of the economic backwardness of the border regions (Hansen 1977) arising from the periphery of these territories, aggravated by the enclosure of space at a closed border, became generally accepted. Thus, well-known research by van Houtum (2000) showed that the economic backwardness of the border territory is manifested in the transmigration, the ageing and the lower standard of living of the population. This thesis is supported by contemporary research: for example, Suchacek (2022) claims that during their development, border regions go from densely populated and economically important territories to sparsely populated areas, which is due to their limited infrastructure and communication links to the rest of the country.

Regional trade has traditionally been the focus of the debate around the economic impact of borders on regional development, and the research tool has been the gravitational model that was used, for example, by J. McCallum who concluded that the Canada–US regional trade patterns are 20 times lower than the ones of interregional trade in these countries (McCallum 1995), which was later adjusted to 20–50% (Anderson and van Wincoop 2003). Gravitational modelling in the analysis of interregional cross-border trade makes it possible to estimate the regional effects of easing trade restrictions between countries.

More recent research has focused on differentiating the impact of various borders on regional development. Thus, in the context of European integration, it has been shown that the more central border regions of Europe benefit more from macro integration than its external border regions (bordering non-EU countries) (Petrakos and Topaloglou 2008). B. Heider’s study is notable in this respect, in which a comparative analysis of the regions of the German–Polish and German–Czech border revealed a significant positive impact of the eastern EU enlargement on the rate of population change in Germany, the Czech Republic and Poland after 2004, which, however, does not compensate for the generally weaker development of the population of border towns compared to the inland cities (Heider 2019). Measuring the supply-side border effects of European border regions, there is a stronger demand for efficiency in the use of local resources than for endowments (Capello et al. 2018).

The above-stated and other regional studies focusing on border regions often use a comparative method comparing territories over time (for example, before and after the removal of legal and administrative barriers to assess their impact on the economic growth of Europe’s border regions (Camagni et al. 2019)) and space (for example, interregional studies of informality and illegality in border regions of different countries (Koff 2015)). This approach certainly allows for assessing the force of the border situation on regional development processes, using the neighboring border regions of the same country or neighboring territories on different sides of the border as objects of comparison. Such an analysis still has limitations due to the absence of the so-called “control” group for comparison, in which the border factor is completely absent (Prokop’ev and Kurilo 2016). In order to overcome this limitation, one can compare border and inland regions of the same country; this kind of analysis is widely used in the works of Russian scientists covering all regions of the Russian Federation and identifying specific features of the development of border regions on the basis of the analysis of the following indicators: GRP per capita (Starikov and Ponomareva 2018), regional budget income (Tishutina 2008), investments (Glazyrina et al. 2011) and the inflow of foreign direct investment to Russia from China (Novopashina 2012).

The territorial organization in Russia implies the division into municipal entities and their association into larger areas—regions (Russian subjects)—that differ significantly in scale. For example, the distance from the regional center of one of the Russian border regions—the city of Novosibirsk—to the border with Kazakhstan is 480 km. Therefore, Russia has already left from the “narrow” understanding of the border territory for the purposes of regional development, understanding that the reduction in negative “border effects” is only possible to consider border municipalities on a small border strip as an integral part of the economy of the region as a whole. The location of borders plays an important role in the regional economy, regardless of the distance to the industrial center of the region. If this distance is more than 100 km, the impact of the peripheral effect—remoteness from the centre of the region, where the main centers of education, health and other services tend to be concentrated—increases. In this sense, the border regions or regions with border municipalities in their composition in Russia are in a more difficult situation than the interior regions and depend to a large extent on how simple trade and movement regimes are with neighboring territories.

It is no coincidence that in documents of strategic character, the border regions are identified as a separate category (Russian Federation 2020). Thus, in the Strategy for Spatial Development of the Russian Federation until 2025 (Russian Federation 2019), 21 subjects of the Russian Federation, located along the land border of the country, are divided into four groups depending on the contiguity with the state being a member of an international association of countries. The composition of these groups and certain administrative, territorial and socio-economic characteristics are presented in Table 1.

Table 1. The border geostrategic territories of Russia.

No	Group Name	Russian Subjects	Total Area, sq. km	Population on 1 January 2022, ths. People	Average per Capita Monetary Income (per Month), rub.	Contiguous State(s)
1	Subject of the Russian Federation bordering the European Union	Leningrad Oblast	83.9	1911.6	36,847	Estonia, Finland
2	Subjects of the Russian Federation bordering the Eurasian Economic Union	Smolensk Oblast	49.8	909.8	30,731	Belarus
2		Altai Krai, Astrakhan Oblast, Volgograd Oblast, Kurgan Oblast, Novosibirsk Oblast, Omsk Oblast, Orenburg Oblast, Samara Oblast, Saratov Oblast, Tyumen Oblast, Chelyabinsk Oblast	2551.6	23,365.3	30,708	Kazakhstan
3	Subjects of the Russian Federation bordering other countries	Altai Republic	92.9	221.6	23,798	Mongolia, China
		Republic of Tyva	168.6	332.6	20,652	Mongolia
		Krasnodar Krai	75.5	5687.3	43,217	Republic of Abkhazia/Georgia
		Belgorod region, Voronezh region, Kursk region, Rostov region	210.3	9056.9	34,456	Ukraine
4	Subjects of the Russian Federation bordering the countries of the Eurasian Economic Union as well as other countries or countries of the European Union	Pskov region	55.4	613.3	29,332	Belarus, Estonia, Latvia
4		Bryansk region	34.9	1168.8	31,608	Belarus, Ukraine

It is worth noting that the Kaliningrad Oblast is not included in the list of the Russian border geostrategic territories in the Strategy for Spatial Development of the Russian Federation until 2025 (Russian Federation 2019) (e.g., in terms of the policy for spatial development it is considered to be a priority geostrategic territory, which is characterized by an exclave status).

Although balanced polycentric development is still a big problem for Russia, there are examples of successful border regions. For example, the ten most successful regions in terms of economic development in 2022 included the border regions of the Samara region and the Tyumen region, which occupy 9th and 10th places, respectively. However, given that there are more than 20 border geostrategic territories in Russia—this is not so much.

3. Regional Cycles

Regional industries are complex systems, which according to Porter, consist of a critical mass of interconnected individual firms based on different knowledge, competencies, resources, and technologies (Porter [1980] 1998). In this sense, entrepreneurs are extremely important. As founders of new firms (Gartner 1988), entrepreneurs form a market for the supply of goods and services in the regional economy and thus create an incentive for existing firms to work better (Fritsch 2011; Porter [1980] 1998) playing a vital role in promoting regional industrial development. The role of a regulator of economic development in a region is assigned to the regional authorities that develop and implement various kinds of policies. Thus, firms and regional authorities are key players in regional industrial development.

The work of Hansen (1951) is considered to be one of the first in-depth works on industry cycles, in which the author highlighted the two-year cycle of the textile industry, explaining its features of a resource renewal technology for cotton cultivation. Hansen (1951) used similar approaches to cycles in the livestock industries. The author (Hansen 1951) defines the economic cycle through fluctuations of the most important macroeconomic variables: employment, production output, and investment.

Upshifts and downshifts in the early research of cycling have generally been associated with fluctuations in real investment. Hansen (1951) proposed distinguishing between real (capital and working assets) and financial (securities purchase) investments (1959, p. 38). Fluctuations in income, output, and employment were seen as key closely related economic characteristics of the industry. It has been noted that the volatility of investment is higher than that of consumption.

The industrial cycle is a variation of the cycle alongside the financial and commercial ones. As it refers to the production of material goods, accordingly, fluctuations are considered in relation to production volumes, prices of resources and products, employment, and investment.

In its most general form, the industrial cycle is defined as the fluctuation of actual production around its potential value (Fischer et al. 1998). Scientists have found that the share of physical assets and investment capacity of production directly affects the depth of the cycle. For example, Hansen (1951) believed that only the heavy industry was most susceptible to abrupt cyclical fluctuations, and the industry cycle was determined by increasing or decreasing purchases of goods for real investment and consumer durables.

In this article, the authors define the regional industry cycle as a dynamic process of fluctuations of economic activity within the life cycle of an industry, characterized by the repeatability of successive stages of decline and rise in the industry of a region.

The characteristics of the ups and downs of business cycles provide important information to entrepreneurs and authorities on the current state of an industry. The information allows investors to minimize the risks of investments, and the entrepreneurs, to understand what to do: increase or reduce production volumes, whether to use a new method of production, a new way of commercial use of the existing product; whether to create a new good or give it a new quality; to expand to a new market or master a new source of raw materials; or to implement organizational innovations. Accordingly, regional authorities are able to adjust regional industrial policies.

The authors share, as many scientists, the concept of the global nature of the non-linearity of mezodynamics in evolutionary economics, as set out in the fundamental monographs of Mayevsky and Kirdina-Chandler (2020), Kleiner (2021), etc.

The modern ideas about cycles in the economy are based upon the works of N. Kondratiev, K. Zhuglyar, J. M. Keynes, S. Kuznets, W. Mitchell, F. Hayek, J. Hicks, J. Schumpeter, and others. Case studies based on the example of the Russian economy examined the impact of innovation on the ups and downs in the modern economy (Glazyev 2018), as well as the causes of crises in the Russian economy (Aganbegyan 2010; Tatarkin and Tatarkina 2010; Yakovets 2013).

Most of the known works are devoted to the study of cycles at the macroeconomic level, including the work (Semenychev et al. 2014) confirming E. Slutsky’s hypothesis about the possibility of modelling cycles in the sum of small harmonics with the odd frequencies of harmonics (Slutsky 1927).

Regarding the spatially cumulative nature of growth, Myrdal (1957) suggested that leading regions are in a better position to take advantage of the opportunities created by the economic boom. It has also been found that the upswing phases of the business cycle start faster in the more developed and larger metropolises, where the agglomeration and market size create an advantage over other regions (Petrakos et al. 2005). It has been noted that during a downturn, the situation may be reversed: the more developed and metropolitan areas tend to suffer more (Petrakos and Saratsis 2000). The concept of protected regions, i.e., isolated economies that depend mainly on state transfers, is also interesting. From this perspective, protected regions do not keep pace with the rest of the aggregate economy and do not use their potential for convergence during expansion periods. They do not suffer as much as other regions during the downturns, and therefore tend to narrow their gap relative to the richer regions (Rodríguez-Pose and Fratesi 2007).

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Subjects: Regional & Urban Planning

Contributors MDPI registered users' name will be linked to their SciProfiles pages. To register with us, please refer to https://encyclopedia.pub/register :

Galina Anatolievna Khmeleva

Valerii Konstantinovich Semenychev

Anastasiya Aleksandrovna Korobetskaya

Marina Viktorovna Kurnikova

Roman Fedorenko

Balázs István Tóth

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Update Date: 26 Dec 2023

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1. Introduction

2. Border Regions as an Object of Regional Analysis

3. Regional Cycles

References