Influence of Underutilization of Production Capacities on the Dynamics of Russian GDP: An Assessment on the Basis of Production Functions

Abstract

Sustainable development of the state implies a proportional change in the key macroeconomic indicators described by standard models, one of which is the exponential production function (a special case of the Cobb-Douglas function), where the number of employees (labor) and the value of fixed assets (capital) acts as factor inputs, and GDP becomes the output, and output elasticities of production factors are estimated. This function is successfully used to analyze and predict macroeconomic processes in both developed and developing economies. The purpose of the study is to use econometric modeling—applying the exponential Cobb-Douglas production function—to identify the presence or absence of dependencies of production factors (labor, capital, etc.) on the final product output in Russia. The study shows that in Russia, GDP does not significantly depend on fixed assets. The authors hypothesized that this discrepancy is due to underutilization of production capacities and proved that to reveal the real dependence of Russian GDP production on the value of fixed assets it is necessary to adjust the indicators published by Rosstat for utilization of production capacities, which made it possible to fully use the methodological capabilities of production functions for the analysis and forecasting of macroeconomic processes in Russia.