Who is Shouldering the Burden of Transition? An Analysis of Depreciation Rates in Russian Industry

Abstract

Did maintaining existing tax codes governing depreciation rates in Russian industry between 1992 and 1995 target particular types of firms to carry a disproportionate share of the burden of transition? Firm-level data collected in 1992 and 1995 are utilized here to assess whether the “engines of transition” - non-state-owned firms, and firms with export experience shouldered a disproportionate share of the burden in the form of below-average depreciation rates and thus an above-average tax burden. The results indicate that ownership and export experience are important explanatory variables in explaining within-industry variation in depreciation rates in 1992. While non-state-owned firms did exhibit below-average depreciation rates in 1992 and thus incurred a higher tax burden, exporters as a category of firms exhibited above-average depreciation rates. Thus, the results are mixed with regard to whether the “engines of transition” shouldered a disproportionate burden. By 1995, the effects of both ownership and export experience on the variation of within-industry depreciation rates diminishes. Regional variation becomes more pronounced in 1995, and tends to coincide the regional variation in the pace of transition.