Diversification of regional economic structure as growth strategy: Pros and cons

Different aspects of diversifying regional economies are analyzed in the article. The results of analyzing changes in sectoral employment structures, gross value added, and industrial production for 2000–2014 are presented, and quantitative estimations of the diversification processes for regional economies and their influence on economic growth are given. Calculations have shown that the sectoral structures of employment and production remain stable within a sufficiently long period, the scale effect is a significant factor of the structural changes, and sectoral structures are most flexible in regions with low economic potential and stable in large regions. The quantitative estimates of diversification of the sectoral employment structures, gross value added, and industrial production indicate different orientations of these processes. The employment structure became more diversified within the considered period, the diversification indicators of the sectoral structures of gross value added and industry declined on average, and the economy of regions became more specialized. The diversification processes of sectoral employment structures, gross value added, and industrial production differ in the character of their influence on economic dynamics. The relationship between diversification of the employment structure and the dynamics indicator is negative for growth rates of employment and industrial production. The growth rates of gross regional product, real income of the population, and labor efficiency are positively related to employment diversification. The relationship of diversification level and growth rates is negative for the sectoral structure of gross value added and industry. The hypothesis is confirmed that diversification can provide stable growth in a regional economy, but does not provide high growth rates. A breakthrough takes place due to intensification of specialization, as is shown by the economic dynamics of regions that achieved the highest growth rates.