A Study Into the Structural Changes Occurring in the Russian Arctic Economies in Response to Spread in Investment Demand via Intersectoral Linkages

One important factor to consider when developing a structural and investment policy of a Russian Arctic region under financial constraints is intersectoral investment flows, making the structural changes that occur within an economic system in response to a spread, via intersectoral linkages, in investment demand a relevant topic. This study seeks to provide an economic toolkit for evaluating those structural changes that arise as a result of intersectoral investment interactions. The study proposes a hypothesis that an increase in the investment performance within inducer-industry causes either an extra investment demand within its associated industries or an investment-related structural change. For the purposes of analyzing the intersectoral linkages, the study uses a methodological framework that relies on input-output model balance. One major outcome of our study is the toolkit for evaluating investment-induced structural changes that also makes it possible for the Russian Arctic economies to predict their possible structural change. The study is novel in that it is one of the few in the field to propose a criterial framework for evaluating investment-induced structural change, describe the economic substance and algorithms for calculating the proposed indicators, and classify the economic sectors’ fixed assets according to the extent of their involvement in the production of end products by the associated industries. The workability of the proposed methodological toolkit was tested in the analysis of one of the Russian Arctic economies (namely, the economy of the Arkhangelsk Region) using the official data of the Federal State Statistics Service. The study further presents the analysis of the effect the intersectoral investment linkages have on the end product mix. Evidence is provided of the pattern and causal relation between the occurrence of a structural change and the spread in investment demand via intersectoral linkages. The study analyzes the structural change also in terms of its consequences. The proposed input-output model balance-based toolkit for evaluating the investment-induced structural changes makes it possible to predict the occurrence of structural changes within sectoral systems. Further research on this topic might involve the use of multiplier method to evaluate the impact of investment-induced intersectoral linkages on regional investment activity levels. JEL: D92, L50, L52, L90