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Regular version of the site

Book chapter

Russia since 1995: Natural Gas, Catching Up and Informality

P. 313-330.

Recent decades were turbulent for the Russian economy. They include the transformational output fall until 1998, recovery in 1999-2008, and stagnation after the global crisis of 2008. What were main drivers of performance of the Russian economy in these years? The present chapter highlights three main sources of growth, which are windfall profits from energy export, technology catching up in manufacturing, finance and business services, and the negative influence of expanding informal economy to aggregate labour productivity growth.

                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 years of soaring oil prices. One more factor of growth was catching up in manufacturing, which is rooted in the fact that Russia, as well as other Central and East European socialist economies on the eve of transition from plan to market, were backwards in technologies in comparison with advanced economies. Finally, the remarkable peculiarity of the Russian economy is the expanding share of informal labour, especially in 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 labour reallocation we report, that expanding informality slowdowns labour productivity growth.