Evaluating Comparative Total Factor Productivity in the Russian Industry

Abstract

Searching for domestic reserves of economic growth has lately become one of the central problems in Russia. The paper examines the role of small industrial enterprises in stimulating economic growth. In contrast to the stereotype that small business serves as a driving force for the economic development and encourages innovation, the authors hypothesizes that in Russia this statement is false. The conceptual and methodological framework of the study rests upon neo-classical models of economic growth. The authors investigate the existing approaches to the analysis of factors influencing economic growth of the state and choose the tools of total factor productivity analysis. Total factor productivity is calculated using the translog production function, which allows determining the effect of the technological level on value added of the object under study. The choice of the type’s function is due to the low elasticity between the factors of production, as well as the imperfect competition in the industrial markets under review. The information base of the research includes the data of small, medium-sized and large enterprises of 10 industrial macro-sectors of the Russian economy for 2013–2017. We use SPARK-Interfax database to assess production functions. The results of the analysis prove that small enterprises operating in the Russian industry demonstrate much lower values of average and weighted average total factor productivity than medium-sized and large enterprises. The general trend for such businesses is a decline in total factor productivity. Only single leading companies produce a gain in value added in small entrepreneurship. Thus, the economic situation in Russia rejects the hypothesis about a higher entrepreneurial potential of small businesses, business models and technological innovations emerging on its basis. Our further studies are assessing institutional traps and general context in the development of small business.