Transition to Knowledge-intensive Growth in Russia

Abstract

The paper proposes a strategy to trigger knowledge-intensive growth based on a combination of bottom up and top down reforms. When both market and government failures are pervasive, institutional innovation (new ways of doing things and reach credible commitments) becomes paramount for growth and reform. The paper discusses entry points to trigger institutional innovation at a local level and proposes a mechanism of incremental self-reinforcing reform (bootstrapping). A three-stage approach to reform is proposed: top down reforms to enhance even playing field; a contest between regions to unleash institutional innovation; active federal industrial policy.