Do Productivity Laggards Ever Catch Up With Leaders?†

Abstract

The paper focuses on trends in the convergence of labor and multifactor productivity in Russia. Using firm‐level data for the period 2011–2016, we show that firms with low‐productivity grow faster than those with high‐productivity. This result is, however, mostly driven by new entrants. The catch‐up momentum fades after the first few years of a firm’s life, so it is not capable of closing the gap between the most and least productive firms in the Russian economy. We show that the gap widened over the period 2011–2016, suggesting major divergence in productivity levels of Russian firms. We also use stochastic frontier analysis to verify the divergence within narrowly defined industries. Our estimates confirm divergence in most industries.