Absolute and Relative Specialization of Regional Economies: A Comparative Analysis

This study of regional economic specialization sectors is a response to the need for effective regional policies aimed at allocating limited financial and labor resources, and at facilitating existing specialization while supporting both industries with potential as well as newly created activities. The specific purpose of this study is to identify and compare the absolute and relative degree of specialization in the Russian Federation’s regions. Determining the sectors in which these territorial entities specialize will clarify the unique competitive advantages that result from a region’s relative specialization and its way of organizing activities with respect to absolute specialization. Absolutely specialized industries were identified by comparing their share in that industrial category with the average value, while relative specialization was determined using the Hoover-Balassa specialization coefficient. This analysis indicates that the number of relatively specialized industries in each region exceeds the absolutely specialized ones by 11%, a figure which reflects the predominance of industries in the regions that make a significant contribution to the national rather than the regional economy. A comparative analysis of absolute and relative specialization permits an assessment of the importance of each activity for a region alongside its competitiveness nationally. The study proposes a typology of regions based on their level of economic specialization and the sectors which they should develop most intensively. Regions where the need for diversification is particularly acute were also identified. These findings should be valuable to regional and federal authorities in developing and implementing regional industrial policy.

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