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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 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) • 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)
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
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
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
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
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
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
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)
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
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
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
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
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
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
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
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
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)