Dynamics of Economic Growth Rates in Russia and a Number of Neighboring Countries in the von Neumann Model

The von Neumann model is one of the simplest ways to assess the maximum possible rate of sustainable economic growth. Although the dynamics it predicts are unstable and prone to strong oscillations (and also yield socially unacceptable equilibria) calculating g, using the von Neumann model to determine the maximum possible rates of long-term sustainable economic expansion can serve as a guide in setting goals for a country’s economic policy. How to apply such a model in practical calculation of growth rates g has long been studied, but few empirical results concerning its use for macroeconomics or any similar topic with spectral properties in multi-sector models have appeared to date, either in Russia or elsewhere. Hence, this study offers a systematic empirical assessment of growth rates g for Russia and several neighboring countries over the past three decades. Calculations were carried out both for the “classical” version of the model and for its “extended” version, which takes capital and labor into account as resources both produced and consumed. National sources of official statistics from SUTs and IOTs were used for calibration, and the calculations themselves were carried out at different levels of aggregation in order to assess the stability of the results obtained. The non-standard assumption used here, that labor is a commodity produced as needed, is quite evident in countries with an open but extremely strict migration policy, such as the oil monarchies of the Persian Gulf. The resultant growth rates turned out to be generally realistic and stable in dynamics even when aggregations are changed. Comparative analysis across countries indicated that the Russian economy in most years had potential growth rates comparable to those of Kazakhstan and China, especially in the “extended” model in which they held at about 17% for many years.

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