Resource Allocation and Productivity of the Russian Manufacturing Industry

The paper analyzes the allocative efficiency of the Russian manufacturing industry. Inefficient allocation between firms arises when there are certain distortions in the market (due to market imperfections or features of economic policy) and can lead to a decrease in the total productivity of the economy. To assess resource allocation efficiency, the authors apply the methodology developed by Hsieh and Klenow and adapt it to the specifics of the Russian economy. Productivity dispersion and covariance between the size and productivity of Russian firms are calculated as the main indicators of allocative efficiency, including at the industry level. High productivity dispersion and low covariance between firm size and productivity within an industry may indicate weak allocative efficiency, which can lower the total productivity of the economy. This analysis shows that the allocative efficiency of Russian manufacturing decreased from 2012 to 2018, especially in the manufacture of coke and petroleum products, wood processing, and production of miscellaneous machinery, equipment, and fabricated metal products. Low allocative efficiency was also evident in the production of basic metals and in the manufacture of motor vehicles. The results of the analysis make it possible to assess the dynamics of allocative efficiency in Russian manufacturing, identify its key determinants, and interpret the results obtained using information about the existing features of operations in different sectors. The paper concludes that several sectors of the Russian economy show potential for increased allocative efficiency; the estimates arrived at should be the basis for more in-depth analysis of industry.