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Regular version of the site

The First Release of Russia KLEMS Dataset is Now Available


The Russian economy is now available for industry-level comparisons with more than three dozen of other economies. This is the result of many years of joint effort by a joint team from the Laboratory for Research in Inflation and Growth at HSE and the Groningen Growth and Development Centre at the University of Groningen. Dale Jorgenson (Harvard University), Marcel Timmer (University of Groningen), Evgeny Yasin, and Ilya Voskoboinikov (HSE) comment on the publication of data on Russia in the World KLEMS project.
 

Russia KLEMS in the system of production and output indicators for World KLEMS inter-country comparisons

KLEMS, the industry growth accounting framework, allows breaking down of output growth rates into contributions of inputs, capital (K), labour (L), energy (E), materials (M), and services (S), and multifactor productivity (MFP).This break down can be calculated both for the economy as a whole, and for specific industries. The first release of the database on the Russian economy is now available online. It includes series of labour, capital, and added value indicators for 34 industries in 1995 - 2009. These series are harmonized with data for other countries represented in the World KLEMS project, including 25 EU member states, Australia, Canada, Japan, South Korea, and the USA. Similar projects for China (China KLEMS), India (India KLEMS), and Latin America (LA KLEMS) are currently at different stages of development.

 
The Russia KLEMS project was initiated by Dale Jorgenson, Professor at Harvard University, and EU KLEMS international consortium. It has been implemented in Russia by the HSE with the support of the Ministry of Economic Development and the Federal State Statistics Service. Currently researchers from the University of Groningen Growth and Development Centre and the HSE Laboratory for Research in Inflation and Growth  are keeping  the project running.

By contrast to cross-country comparisons of economies as a whole, the industry-level perspective provides more detailed and realistic data for analysis, since the nature of growth in agriculture, mining, manufacturing, and financial services could be different.

Moreover, growth can be explained not only by changes in productivity within industries, but also by the reallocation of labour and capital inputs among them. This growth enhancing reallocation, according to recent studies, characterizes successful, rapidly developing economies. Until recently, the key obstacle to studying Russian economy using industry-level cross-country comparisons has been the lack of data. Researchers haven’t had an equivalent system of industry indicators for a comparatively long period, since 1995, harmonized with similar data for other countries. Russia KLEMS initiative addresses this gap.

Key publications using Russia KLEMS data

Timmer, Marcel P., and Ilya B. Voskoboynikov. 2013. "Is Mining Fuelling Long Run Growth in Russia? Industry Productivity Growth Trends since 1995." GGDC Research Memorandum GD-137.


de Vries, Gaaitzen J., Abdul A. Erumban, Marcel P. Timmer, Ilya B. Voskoboynikov, and Harry X. Wu. 2012. "Deconstructing the BRICs: Structural Transformation and Aggregate Productivity Growth." Journal of Comparative Economics 40 (2): 211-227.

Voskoboynikov, Ilya B. 2012. "New Measures of Output, Labor and Capital in Industries of the Russian Economy." GGDC Research Memorandum GD-123.
 

Comments

 
Dale W. Jorgenson, Samuel W. Morris University Professor of Economics at Harvard University

I had the good fortune to be present on the occasion of the launching of Russia KLEMS at a workshop held at the Higher School of Economics in Moscow on March 31, 2008. The challenges to completion of the project were formidable. Important progress had been made on convergence of Russian National Accounts to the level of advanced OECD countries. However, substantial gaps remained from the interruptions of collection and processing of basic economic data that accompanied the establishment of the Russian Federation as an independent nation.

The initial version of the Russia KLEMS data set has now been completed and posted on the World KELMS website (http://www.worldklems.net/data/index.htm). This achievement has been made possible by extended co-operation between economists and statisticians. As a consequence, Russia has joined more than forty countries around the world that are developing industry-level data sets for analyzing growth and productivity in the World KLEMS Initiative. These data sets are rapidly becoming indispensable for the development of longer-term economic strategies.

What does a Russia KLEMS data set tell us about the Russian economy? Russia KLEMS is a system of production accounts for industry outputs, as well as inputs of capital, labor, and productivity, the sources of Russian economic growth. Traditional systems of national accounts cover only the demand side of the economy. While this simplification is useful in providing high-frequency indicators of the current state of the economy, it becomes a severe handicap in analyzing longer-term issues involving supply, such as the sources of growth, changes in the structure of the economy, and international competitiveness.

 Russia’s recovery from the sharp economic downturn following dissolution of the former Soviet Union and the transition from socialism has been most impressive. However, based on the new dataset Timmer and Voskoboynikov (2013) (http://www.ggdc.net/publications/memorandum/gd137.pdf) found that rapid growth and increases in productivity, widely anticipated by observers of the Russian economy, have characterized only service industries like financial intermediation and business services that were substantially under-developed in the 1990s. Mining industries have attracted large investments, unaccompanied by gains in efficiency, and now contribute a quarter of Russian GDP. Russian manufacturing industries have achieved increased efficiency, especially in modernizing industries like electrical machinery, but these industries have contracted in relative importance. The manufacturing industries of Eastern Europe have attracted substantial foreign direct investment and have been integrated into supply chains for Western European industries, especially in Germany. By contrast, Russian industries are steadily losing market share in international and domestic markets to foreign competition from Asia and Europe.

Another surprise is that Russian statistics have proved to be more than adequate as the basis for the Russia KLEMS project. This reflects the close collaboration of economists, who have provided new methodologies for growth accounting, and statisticians, who have made rapid progress in overcoming the gaps in the industry-level data. The recent contributions of Rosstat, the Russian statistical agency, to estimates of industry output and employment at the detailed industry level have been particularly valuable.

Russian economists have now developed a clearer understanding of the far-reaching transition of the Russian economy, replacing speculative observations based on incomplete information. Russia KLEMS is especially useful in comparing Russian experience with that of other transition economies, such as the smaller economies of Eastern Europe and China, the largest economy in Asia, as it has been done in the paper of de Vries and others (2012). The Russian statistical system has benefited by establishing the foundations of national accounts that meet the highest international standards established by the United Nations’ 2008 System of National Accounts, released in 2009.

Much remains to be done. The most important research opportunity will be created by a new supply and use table (SUT) for Russia for the first time since 1995, when the economy was nearing a low point. This important effort will involve Rosstat and has received financial support from the Ministries of Economics and Development. A new and up-to-date SUT will enable Russian statisticians to allocate GDP by industry in a fully satisfactory way, including the distribution of intermediate products as well as industry-level outputs.
The new SUT will also provide the basis for a more precise Russia KLEMS data set that covers the recent history of Russia and can be integrated with the Russian system of national accounts. The Russia KLEMS data set can also be linked to similar data sets for other leading economies, using industry-level purchasing power parities. This will enable Russian policy-makers to identify the most and least competitive industries and to formulate an empirically- founded strategy to guide Russian economic growth in the coming decades.

Evgeny Yasin
, Academic Supervisor of the HSE

Dear friends,
Over the last two decades I have been hearing about the problems of Russian statistics. I’m happy that today I have an opportunity to speak about solutions and results. Indicators of output, labour, and capital have been published for over 30 Russian industries for the period since 1995, and their quality is confirmed by such world-renowned experts as Dale Jorgenson and Marcel Timmer. Everyone who has worked with Russian industrial statistics, who has constantly faced the necessity to glean data from various statistical sources and keep thinking about possible changes in methodology and classifications, will value this breakthrough. In addition to that, now there is an opportunity to carry out inter-country comparisons with more than 40 countries participating in the World KLEMS project, on the industry level.

As a result, Russia has become more transparent for economics researchers, business analysts and policy-makers both in Russian and global economies. This opens the opportunities for a dialogue with international academics and such international organizations as the World Bank, IMF, and OECD. It is also useful for Russian statisticians, since Russia KLEMS is a pilot project for them, a prototype for implementing modern statistical methods in Russian official statistics. The methods used in the project may be of interest for our colleagues in post-Soviet countries. Russia has become the first of the CIS countries to appear on the map of contemporary industry-level inter-country comparisons in the big World KLEMS project, which today covers all key economies of Europe, the USA, China, Japan, countries of Latin America and Southeast Asia. We would be happy to share our experience of adapting our joint heritage of Soviet statistics, with all its advantages and shortcomings, to the cutting-edge global standards.

So, what have we learned about the Russian economy thanks to the project’s data? We have analyzed the sources of Russian economic growth during the pre-crisis period, and found out that the rapid growth of the 2000s had an unfavourable structure and was related either to a capital surplus in the raw materials sector and trade, or to the expansion of the services sector, which had been falling behind in early 1990s. That’s why the slow post-crisis rehabilitation of the Russian economy is, in the first place, a consequence of its internal disproportions, which are not obvious in the stage of growth. We have also received a fuller picture of Russia’s technological lag. It turned out that the technological gap between Russia and developed countries has shrunk a little during the market economy, but is still huge. That’s why today we have lots of opportunities to improve production by adopting  cutting-edge technologies. That was how  post-war Europe decreased the production gap with the USA. We have also received many other interesting results.

It is very important not to be satisfied with what has been achieved and continue developing Russia KLEMS project. At the end of 2015 the Federal State Statistics Service will publish Supply and Use tables (SUT) which will be integrated with Russia KLEMS indicators. This will bring the tools of economic policy-making and analysis to a new level. For example, we’ll be able to analyze not only direct input by certain industries and factors of production in the total growth rate, but to consider their indirect influence, through interim production for other industries. From the research conducted by Dale Jorgenson and his colleagues we know that direct input from industries producing semiconductor computers is almost invisible in the total American economy growth. But its indirect influence shows that the role of information technology and software is the key in the growth of the last decades. I believe that similar analysis of the Russian economy will bring us many surprises, and I follow the development of this project with great interest.

Marcel P. Timmer, Professor of Economic Growth and Development at the University of Groningen and Groningen Growth and Development Centre
 
Having worked with productivity statistics for a wide variety of countries within the World KLEMS project, I was pleasantly surprised by the abundant availability of economic statistics for Russia. Building upon a strong tradition of data collection, the transition towards an international comparable system within the framework of the System of National Accounts and an International industrial classification has been surprisingly fast. From the perspective of building productivity accounts, the information on investments, output and employment was particularly rich. Also the importance of issues such as the size of the shadow economy and informal employment for the Russian economy is well reflected in the available collection of statistics. Based on this, it was possible to construct a first version of the Russian KLEMS dataset, providing for the first time an in-depth analysis of productivity performance of the Russian economy. And through the World KLEMS initiative, new comparisons with performance of a wide variety of other countries can be made.

At the same time it should be stressed that this database is an analytical database constructed through deep research efforts. While official statistics are at the heart of the construction process, various assumptions and short cuts had to be made in order to arrive at a full set of productivity accounts. Let me mention three areas for further improvement in particular. First, better measures of real value added are needed, preferably through a proper double deflating procedure. The development of a new SUT table will be an excellent starting point for this. Second, price series for investment goods, in particular high-tech goods, and software, should be improved to reflect rapid increases in quality. Third, full consistency between output, labor and capital accounts within the framework of the national accounts should be achieved. While challenging I am hopeful that this first attempt will be taken up into the statistical work programs to further improve the quality of Russian productivity statistics. Judged by the achievements made in the past and the dedication towards the project, nothing less is to be expected.

Ilya Voskoboynikov, Research Fellow at the HSE Laboratory for Research in Inflation and Growth

The recently published data set is the result of the efforts over many years  of several Russian and international experts. In 2006 the analysis of the Russian economy’s production became part of the research program founded at the HSE in the Laboratory for Research in Inflation and Growth headed by Revold Entov. The first serious effort on implementing Dale Jorgenson’s initiative became possible thanks to support fromAndrey Yakovlev andEvgeny Yasin. With their participation, in 2007 the HSE allocated funds for analyzing the opportunity to build a system of industry growth accounts on the basis of Russian statistics. That study was implemented by HSE researchers, Vladimir Bessonov, Aleksey Ponomarenko, Igor Kim, Elena Dryabina, and me. The results of the study were discussed at a seminar on March 31, 2008, with leading specialists of the Federal State Statistics Service, Russian experts, as well as representatives of the EU KLEMS consortium and Dale Jorgenson, and became the basis for the Russia KLEMS data set.

The system of real added value indicators is based on the industrial production indices, which have been developed since the early 1990s by Eduard Baranov and Vladimir Bessonov. At  all stages the project has been professionally supported by Vladimir Gimpelson and Rostislav Kapelyushnikov from the HSE Centre for Labour Market Studies, leading experts in the Russian labour market and Russian labour statistics with strong international backgrounds. They helped to reveal and solve many questions on the dynamics of labour costs in industry. The project wouldn’t have been realized without organizational and methodical support from the Federal State Statistics Service on different levels – from management to ordinary staff members, responsible for calculating certain indicators. I’d like to specially mention statisticians who have worked in the National Accounts Office – I. Bezrukavaya, M. Gordonov, A. Konstantinov, L. Kochneva, and G. Romashkina. They explained the specifics of official statistics of investment and capital assets, and made a big contribution to solving the most difficult tasks of the project.

In 2008 the Groningen Growth and Development Centre joined the work on the Russia KLEMS project. The Centre is experienced in working with industry statistics, inter-industry comparisons and research in long-term trends of economic development. They also have research interests in the economic history of Russia, which go back to Angus Maddison’s work. Reitze Gouma, Robert Inklaar, Gaaitzen de Vries and, especially, Marcel Timmer have contributed to the project, sharing the experience of the Centre to solve multiple Russia-specific problems with primary data.
 
Publishing the first release of the Russia KLEMS data set doesn’t mean we are finishing the project. We are starting work on the next release, in which the series will be extended until 2012 and some variables will be added. The key question to be answered with the second release is about the consequences of the 2008 crisis on long-term productivity trends of the Russian economy in the comparative perspective. One more important stage is integration of the new benchmark Supply and Use tables for the Russian economy, which are expected to be published in the end of 2015, with the Russia KLEMS series.
 
In addition to academic purposes, Russia KLEMS will be useful for Russian statisticians to help them adapt new international statistical methodology on the Russian economy. The Russia KLEMS data should not be considered as a substitute for the official statistics, because official data is more accurate, strong, detailed and based on more comprehensive primary information. However, Russia KLEMS can work as a prototype dataset to improve the roadmap for Russian statistics development, helping to highlight the most important and questionable areas in the official statistics.
 
Finally, Russia KLEMS provides a unique empirical basis for policy oriented research. Strong interest in this data has already been expressed by our colleagues from the Conference Board, the Institute for Economies in Transition of the Bank of Finland (BOFIT), OECD and the Vienna Institute for International Economic Studies (WIIW).
 

 

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