ABSTRACT
The present study reports that oil and gas money fuelled Russian growth in the form of capital services in extended mining and market services. The contribution of capital input was higher in the years of soaring oil prices. One more factor of growth was catching up, which is rooted in the fact that Russia, as well as other Central and East European socialist economies (CEEs) on the eve of transition from plan to market, were backwards in technologies in comparison with advanced economies. Similar to CEEs, in the years after transition Russian manufacturing outperformed the West in productivity growth. This provided a remarkable contribution to aggregate productivity. Before 2008 Russia also gained from MFP growth in financial and business services, because the initial level of these sectors was low even in comparison with CEEs. Finally, the remarkable peculiarity of the Russian economy is the expanding share of informal labor, especially in the years of outstanding growth before 2008. This makes Russia, to a certain extent, similar to India. Splitting industries into formal and informal segments and estimating the contribution of labor reallocation, we report that expanding informality slows down labor productivity growth.
