|Date 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)

|Date 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)

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

|Date Introduction: What are sources of growth in Russia in ? Real Value Added Labor Labor Productivity Real value added growth rates contributions (yearly av. growth rates, in percent. points) Source: The Russia KLEMS database 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 ) Initial fall of MFP due to disorganization

|Date Introduction: What are sources of growth in Russia in ? Real Value Added Labor Labor Productivity Real value added growth rates contributions (yearly av. growth rates, in percent. points) Source: The Russia KLEMS database H0: Extensive growth story Growth engines after transition Energy directly (low prices/energy inputs)Energy directly (low prices/energy inputs) Energy indirectly (investments)Energy indirectly (investments) H1: Intensive growth story Growth engines after transition Better inputs allocation (no Price Fog)

|Date Introduction: novelty and structure Novelty New dataset - 35 industries - in 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 & SUTs - Labor - Capital Methods - Double deflation - LP decomposition - Growth Accounting Results/Discussion Project in progress (…should know) - Statistics - Analysis

|Date Data: Output and Deflation Classification problem (old -> new in ) 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 Volume Indices of Gross output Detailed bridges btw the classifications

|Date 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

|Date 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)

|Date Results by sectors Contribution to labor productivity growth (in percentage points) Source: The Russia KLEMS database Comments LP of economic growthLP is a major source of economic growth With VA gr. rates in : 4.57 pp : 7.35 pp Sectors WthBtwTot WthBtwTot TOTAL Market Services Energy-intensive & exp. goods Agriculture Non-exp. Goods N.-M. serv

|Date Results by sectors Contribution to labor productivity growth (in percentage points) Source: The Russia KLEMS database Comments LP is a major source of economic growth LP are driven by Market ServicesLP are driven by Market Services The role of Energy- intensive & exp. is relatively modestThe role of Energy- intensive & exp. is relatively modest Sectors WthBtwTot WthBtwTot TOTAL Market Services Energy-intensive & exp. goods Agriculture Non-exp. Goods N.-M. serv

|Date Results by sectors Contribution to labor productivity growth (in percentage points) Source: The Russia KLEMS database 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 growthLabor reallocation is a substantial source of LP growth Sectors WthBtwTot WthBtwTot TOTAL Market Services Energy-intensive & exp. goods Agriculture Non-exp. Goods N.-M. serv

|Date Results by industries of M. Services Contribution to labor productivity growth (in percentage points) Source: The Russia KLEMS database Comments Wholesale trade and Inland Transport dominates among M. ServicesWholesale trade and Inland Transport dominates among M. Services Sectors WithinBtwTotalWithinBtwTotal TOTAL M. Services W-sale trade Inl. transport Construction Oth. M. Serv

|Date Results by industries of the Energy- Intensive and Exp. Goods sector Contribution to labor productivity growth (in percentage points) Source: The Russia KLEMS database Comments Basic Metals and Mining & Quarrying are engines of this sectorBasic Metals and Mining & Quarrying are engines of this sector However, a contribution of the sector is almost the same as of Agriculture Sectors WithinBtwTotal WithinBtwTotal TOTAL En.-intens & exp. Goods Basic metals Min. & Quar Others Agriculture

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

|Date Results: Growth Accounting for Major Industries of the old classification ( ) 16 Capital Intensity and MFP contributions to VA growth rates 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

|Date 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

|Date Conclusion:...what we should know Data/Statistics (in collaboration with Rosstat) New detailed benchmark SUTs (in progress; expected in 2012) Detailed Russian National Accounts in (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)

|Date Thank you!