Innovations and Labor Productivity in Russian Regions: Determinants of Interdependence

It is known that innovations are one of the most important factors in labor productivity growth. However, not all regional economies are able to convert innovation costs into productivity growth. This article analyses how the sectoral structure of regional economies determines the relationship between labor productivity and innovation in the regions with different welfare levels. The empirical base of the study is represented by the data covering 80 regions within the period of 2011–2021. The methodological approach was based on cluster and regression analysis. The authors identified typical industry profiles in Russian regions over the period under study, differentiated the regions by wealth level and assessed the impact of innovation activity indicators on regional productivity. The research results show that the sectoral structure determines the impact of innovations on labor productivity only in regions with an average welfare level. It practically does not play a role for the richest and most backward regions. But in general, lagging regions demonstrate a higher susceptibility of productivity to innovation. The obtained conclusions indicate that the implementation of the strategy towards increasing labor productivity and reducing interregional differences can rely on a combination of innovative and structural industrial policies.