Modeling the economic effects of import substitution in russian manufacturing industry

Regional and branch economy
Authors:
Abstract:

The relevance of the studied subject is, firstly, in the peculiarities of modern economic dynamics, more frequent economic crises, increased likelihood of trade wars, sanctions, aggravated political and military conflicts; secondly, in significant dependence of the Russian economy on imports of manufactured goods; thirdly, in the unresolved theoretical issue of the volume and structure of import substitution bringing benefits to the economy. The goal of the study has been to modify the model of economic effect of domestic subsidies (assuming non-zero costs and net losses of import substitution policy) into the model of economic effect of import substitution in industry, find the condition of effective import substitution. The methods of the study included mathematical modeling and economic analysis. As a result, we have modified the macro-model of the economic effect of domestic subsidies in order to take into account the economic effect of import substitution. The obtained model, in contrast to the modified one, includes a more complex structure of effects: we propose to allocate structural elements, which are not only benefits of manufacturers but also benefits of the state and the population, as well as in the surplus of the manufacturer (not decomposed into components in the original model), for the state, for the industrial enterprise manufacturing the import-substituting products and for the population. The presented model allows to take into account a greater number of factors when calculating the costs and benefits of import substitution and to make more informed management decisions regarding the use of import substitution tools. We have formulated the condition of effective import substitution on the basis of the selected effects. We have calculated the economic effects of import substitution in the Russian manufacturing industry for the structure of the economy in 2016. We have established that subsidizing part of the working capital can be an effective tool for import substitution, expansion of industrial production, creation of jobs and improving the living standards of the population in case of underutilized production capacities. The calculations did not take into account the benefits of the supplying companies, the distribution of benefits of import substitution between manufacturing industries, commercial banks, development institutions in the process of state funding of the import substitution policy of and other effects. Directions for further research are the following: since different industries are characterized by different values of profitability, productivity, asset turnover, share of loaded production capacity, etc., it is necessary to calculate the economic effects of import substitution for individual industries and individual enterprises.