would increase by almost 1.5 percent.<sup>10</sup> The growth rate of the working age population is insignificant in this specification, which could be caused by possible endogeneity. Higher initial level of participation rate as well as higher growth in it also positively contributes to GDP per capita growth. One percentage point of each could add 0.4 percent to GDP growth.

Direct estimation could lead to biased results because of endogeneity. The problem is that working age ratio and participation ratio are contemporaneous with the dependent variable. And in this case they may be affected by the previous level of GDP per capita and as a result by current level of GDP per capita growth (what is simple difference of current and previous level). The main channel of such reverse causality is migration. Internal migration is not very high in Russia (see Guriev and Vakulenko 2012), but could still be significant. There are no strong administrative barriers for migration in Russia and more developed and faster growing regions could attract more immigrants from other regions. And the majority of migrants would likely be working-age and this would increase the working-age ratio. To control for this, we use two methods.

**Table 1: Estimation Results (equation 8)**

|VARIABLES(in logs)|(1)<br>Panel Estimation<br>Growth in GDP per capita|(2)<br>Panel Estimation<br> Growth in GDP per capita<br>(Adjusted for migration)|(3)<br>Arellano‐Bond model<br>GDP per capita|(4)<br>Arellano‐Bond model<br>GDP per capita<br>(Adjusted for migration)|
|---|---|---|---|---|
|initial GDP per capita|‐0.234***<br>(0.028)|‐0.218***<br>(0.028)|0.712***<br>(0.009)|0.739***<br>(0.011)|
|initial working‐age ratio|1.497***<br>(0.137)|1.453***<br>(0.130)|1.788***<br>(0.044)|1.640***<br>(0.028)|
|working‐age ratio growth|0.745***<br>(0.264)||0.537***<br>(0.118)||
|adjusted working‐age ratio growth||1.201***<br>(0.242)||0.977***<br>(0.084)|
|initial participation rate|0.443***<br>(0.061)|0.429***<br>(0.057)|0.636***<br>(0.025)|0.592***<br>(0.027)|
|participation rate growth|0.449***<br>(0.050)|0.425***<br>(0.049)|0.586***<br>(0.019)|0.547***<br>(0.021)|
|Observations<br>R‐squared|1,162<br>0.262|1,162<br>0.273|1,083|1,083|
|Number of reg<br>***p<0.01,**p<0.05,*p<0.1<br>Robust standard errors in parenthese|78<br>s|78|78|78|

First, we use growth of the migration-adjusted working age ratio. By this we mean the estimated working age ratio (and its growth) which could be without any migration flows (both internal and external). This variable in theory is free of endogeneity and that it why could be used in the estimation. To estimate this, we would need to subtract the net inflow of migrants from the total population of each region by age groups and recalculate the growth of the working age ratio. However, we did not have good information for migration flows in the Russian regions.<sup>11</sup> Instead, we had good demographic information for estimating the

> 10 The high elasticity  could be driven by annual dynamics. The approach that follows is less sensitive to short-term fluctuations.

> 11 The information about the migration flows is collected directly but the quality of these data is poor. In our approach, we do not distinguish between the interregional and external migration.

10