that had per capita real GRP higher than RUB 200,000 are noticeably outliers (Table 5).<sup>8</sup> Dividing the rest into three equal thirds, the high-range portion spans RUB133,330–RUB200,000 (making up the rest of the upper range); the middle-range portion spans RUB66,666–RUB133,330 , and the lower-range regions have with real per capita GRP of less than RUB66,666. The distribution is skewed toward lower-end values, with only 12 regions in the top category (7.23 percent of all regions), a majority of 44 in the middle category (53.01 percent), and finally 27 in the bottom segment (33 percent).

Russia’s leading regions in terms of development other than Moscow and St. Petersburg are in a broad swath across the north. Its lagging regions are concentrated in pockets in the south and southwest (Figure 18). As will be shown, the uneven distribution of oil and other mineral resources in Russia does a lot to explain this pattern. The federal regions with the highest proportions of lagging subjects are North Caucasus, where all are lagging, and Southern and Volga, both of which have a larger share of lagging federal regions than the Russian Federation as a whole.

The best-performing regions are in the Far East, which has the second highest share of leading regions and none lagging; Ural, with the largest share of leading regions at 50 percent, and North Western, with the third highest share of leading subjects (Figure 19). Figure 20 shows that the picture is not much different on a population-weighted basis. All regions in the North Caucasus are lagging, and none in the Far East.

Poverty is more persistent in the Far East and Siberian regions, which border China and Central Asia (Figure 21); but GRP per capita is not the lowest, suggesting that poverty in the Far East and Siberia coexists with opportunity. In other words, the distribution of income in the Far East and Siberia seems to be more unequal; in the North Caucasus it seems to be more equal but lower.

As expected, the relationship between the poverty rate and real per capita GRP is negative (Figure 22). Only two outliers are identified, corresponding to areas in the Southern and Siberia federal regions where the poverty rate is considerably higher than would be expected for the value of real per capita GRP.

# **INBOUND FDI IN RUSSIA’S REGIONS**

The regional distribution of FDI is highly concentrated, although it has recently become more even. Driving the concentration are both the geographical concentration of oil and gas resources and the concentration of business activity in Moscow and St. Petersburg. As measured by the HHI,<sup>9</sup> the distribution of FDI across Russia’s 83 regions is significantly more concentrated than the distribution of GDP or population, though not as concentrated as the distribution of mineral exports (Figure 23).The share of the top three federal regions in Russia’s FDI inflows fell from 69 percent in 2002 to 48 percent in 2011. In both years, the largest FDI flows were to Moscow city and Moscow oblast in the Central District and Sakhalin Oblast in the Far East District.

> 8 There are no evident outliers at the bottom of the distribution, except for the two poorest, Ingushetia and Chechnya.

> 9 The Herfindahl index is calculated as the sum of squared market shares of the variable of interest and has a maximum value of 100 if the distribution is completely concentrated in one region.

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