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What We Know and What We Should Know about Economic Growth in Russia

What We Know and What We Should Know about Economic Growth in Russia. Russia KLEMS Progress Report for the First Harvard World KLEMS Conference, August 19-20, 2010 Ilya Voskoboynikov (University of Groningen). What is “Russia KLEMS” ?. Started in 2007 (on the initiative of Dale Jorgenson)

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What We Know and What We Should Know about Economic Growth in Russia

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  1. What We Know and What We Should Know about Economic Growth in Russia Russia KLEMS Progress Report for the First Harvard World KLEMS Conference, August 19-20, 2010 Ilya Voskoboynikov (University of Groningen)

  2. What is “Russia KLEMS” ? • Started in 2007 (on the initiative of Dale Jorgenson) • Partners • GGDC (University of Groningen) • State University - Higher School of Economics (Moscow) • Supported by the Ministry of Economic Development of the Russian Federation • In collaboration with the Federal State Statistics Service (Rosstat)

  3. Introduction: What are sources of growth in Russia in 1995-2006? • H0: Extensive growth story(inputs driven) • Growth engines before transition • Labor (till late 1950s) • Capital (till late 1980s) • Energy (1973-1985) • Growth engines after transition • Sectoral structure inertia • Energy directly (low prices/energy inputs) • Energy indirectly (investments) • Exports (terms of trades) Real value added growth rates contributions(yearly av. growth rates, in percent. points) Source: The Russia KLEMS database

  4. Introduction: What are sources of growth in Russia in 1995-2006? • H0: Extensive growth story(inputs driven) • H1: Intensive growth story(productivity driven) • Growth engines after transition • Better inputs allocation (no “Price Fog” - ref. to Harberger 1998) • No export rent (low oil prices in 1992-1999) • Initial fall of MFP due to disorganization Real value added growth rates contributions(yearly av. growth rates, in percent. points) Source: The Russia KLEMS database

  5. Introduction: What are sources of growth in Russia in 1995-2006? • H0: Extensive growth story • Growth engines after transition • Energy directly (low prices/energy inputs) • Energy indirectly (investments) • H1: Intensive growth story • Growth engines after transition • Better inputs allocation (no “Price Fog”) Real value added growth rates contributions(yearly av. growth rates, in percent. points) Source: The Russia KLEMS database

  6. Novelty New dataset 35 industries in 1995-2006 Real Value Added based on Double Deflation Labor productivity decomposition by industries Influence of labor reallocation on labor productivity growth rates Capital Services Structure Data (“What we know…”) Output & SUT’s Labor Capital Methods Double deflation LP decomposition Growth Accounting Results/Discussion Project in progress (“…should know”) Statistics Analysis Introduction: novelty and structure

  7. Data: Output and Deflation • Classification problem (old -> new in 2003-4) • Supply and Use Tables (SUT) in current and constant prices, consistent with Russian NA • Based on the benchmark tables of 1995; • Final Demand and Gross Output data of 1995-2006 • Volume Indices of Gross output • Detailed bridges btw the classifications

  8. Data: Labor and Capital • Labor • A number of workers • Based on the Labor Force Survey (LFS) • Firms-reported data is used for further disaggregation • Capital (for the old classification only) • Investments in constant prices by types of assets • Benchmark is the net capital stock of 1990 • Exogenous rate of return

  9. Methods 1. Labor productivity decomposition,total - within – between (OECD Prod. 2001): 2. Real Value Added based on Double Deflation (OECD Prod. 2001): 3. Growth Accounting (EU KLEMS Meth.; OECD Cap. Measur. 2009)

  10. Results by sectors Contribution to labor productivity growth (in percentage points) • Comments • LP is a major source of economic growth With VA gr. rates in • 1995-2006:4.57 pp • 1999-2006:7.35 pp Source: The Russia KLEMS database

  11. Results by sectors Contribution to labor productivity growth (in percentage points) • Comments • LP is a major source of economic growth • LP are driven by Market Services • The role of Energy-intensive & exp. is relatively modest Source: The Russia KLEMS database

  12. Results by sectors Contribution to labor productivity growth (in percentage points) • Comments • LP is a major source of economic growth • LP are driven by Market Services • The role of Energy-intensive & exp. is relatively modest • Labor reallocation is a substantial source of LP growth Source: The Russia KLEMS database

  13. Results by industries of M. Services Contribution to labor productivity growth (in percentage points) • Comments • Wholesale trade and Inland Transport dominates among M. Services Source: The Russia KLEMS database

  14. Results by industries of the Energy-Intensive and Exp. Goods sector Contribution to labor productivity growth (in percentage points) • Comments • Basic Metals and Mining & Quarrying are engines of this sector • However, a contribution of the sector is almost the same as of Agriculture Source: The Russia KLEMS database

  15. Results: Growth Accounting for Major Industries of the old classification (1999-2004) LP and Hours worked contributions to VA growth rates Capital Intensity and MFP contributions to VA growth rates

  16. Results: Growth Accounting for Major Industries of the old classification (1999-2004) • MFP contribution dominates in most industries • Capital intensity is substantial for Communications and Trade • NOTE: in the old classification • Manufacturing = • Mining (C) • Manufacturing (D) • Energy distr.(E) • Trade = • Wholesale trade • Retail trade • Other Services Capital Intensity and MFP contributions to VA growth rates

  17. Conclusion: “What we know...” • H0: Extensive growth story • Energy directly (low prices/energy inputs) • (-) Mining and Energy-Intensive sectors do not provide major contribution to LP growth • (+) Substantial Role of Capital Intensity in Communications and Trade • H1: Intensive growth story • Better inputs allocation (no “Price Fog”) • (+) Substantial positive influence of labor reallocation on LP growth

  18. Conclusion: “...what we should know” • Data/Statistics (in collaboration with Rosstat) • New detailed benchmark SUT’s (in progress; expected in 2012) • Detailed Russian National Accounts in 2002-2009 (in progress; new release of 79 industries is expected in September of this year) • Detailed National Accounts in the new classification in Retrospect since 1990 • Analysis • Capital services and growth accounting in the new classification (in progress) • Labor composition effects (in progress) • Further decomposition of Market Services and Inland Transport • What services are important for growth? (gas export or something else)

  19. Thank you!

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