Widening the productivity gap in the Russian economy in 2009–2015: Stochastic frontier analysis using firm-level data

This paper analyzes total factor productivity (TFP) in Russia over 2009–2015 using firm-level data. Stochastic frontier analysis is employed to simultaneously estimate TFP growth and the distance to the production-possibility frontier for each firm in the sample. The results suggest significant positive rates of technological progress; however, the gap between technological frontier firms and laggards widened over the entire period under consideration. Consequently, most sectors experienced negative average TFP growth in 2009–2015. Technology diffusion from leading to less efficient firms in Russia remained limited, resulting in persistently low average productivity growth. Although the market­ share of less efficient firms shrank over time, these firms did not exit the market, leaving­ scarce resources trapped in inefficient production. To accelerate TFP growth, it is ­essential to create conditions that encourage the quicker exit of inefficient firms. This can be achieved by simplifying bankruptcy procedures, shifting government support from distressed to expanding enterprises, and reducing unreasonable administrative barriers.