Russian firms' TFP grew 5% in 2018-2023, efficiency key
A Bank of Russia working paper finds Russian firms' total factor productivity grew cumulatively by 5% between 2018 and 2023. This growth was primarily driven by changes in efficiency rather than technological progress.
Efficiency, not technology, drove TFP
Average annual total factor productivity (TFP) growth among Russian enterprises fluctuated between -2.4% and 3.9%, resulting in approximately 5% cumulative growth over the six years from 2018 to 2023.
The study, employing stochastic frontier analysis (SFA) on firm-level data from the SPARK dataset covering approximately 120,000 firms, decomposed TFP dynamics into technological progress (frontier expansion) and changes in efficiency relative to the frontier.
It found that fluctuations, particularly during the 2020 COVID-19 pandemic and the 2022 sanctions shocks, stemmed primarily from these efficiency changes.
Technological progress, representing the expansion of the productivity frontier itself, remained modest and stable throughout the period, indicating firms adapted operations rather than adopting fundamentally new technologies.
Sectoral resilience and trade shifts
The impact of economic shocks varied significantly across sectors.
In 2020, contact-intensive services (accommodation and food, arts and entertainment, personal services) contracted sharply.
In 2021, TFP declined primarily due to wholesale trade and transportation amid lasting supply chain disruptions.
Most sectors experienced negative growth in 2022, with manufacturing being a notable exception, showing acceleration.
In 2023, most sectors rebounded strongly, except for wholesale and retail trade.
Exporters were hit hardest in 2021–2022, while importers (especially in manufacturing) showed stable or accelerating TFP growth, benefiting from import substitution.
Recovery's fragile foundations
While Russian firms demonstrated notable resilience, the underlying drivers of the 2023 recovery warrant scrutiny, potentially reflecting intensive resource use and government spending rather than deep structural improvements.
The persistent decline in trade and logistics sectors highlights the lasting costs of structural transformation.
Future productivity growth hinges on fostering technological progress and navigating access constraints in global capital and technology markets.