Labor and Capital Costs in Estimates of Sources of Labor Productivity Growth for Russian Regions

Abstract— Identifying the reasons for the differentiation of Russian regions in terms of the level and rate of growth of labor productivity is a task that has long attracted the attention of researchers. The tool for solving it is the decomposition of labor productivity growth into contributions from capital–labor ratio and total factor productivity (growth accounting), as well as variations in labor productivity levels (development accounts). This paper uses both approaches, as well as industry and regional data for the period 1995–2023. It is shown that the effective application of development and growth accounts is hampered by a significant discrepancy between the generally accepted alternative estimates of two indicators—fixed capital and the share of wages in gross regional product (GRP). The spread in estimates of the sources of labor productivity growth is particularly strong in regions with a high share of capital-intensive extractive industries, where the discrepancies between both indicators are significant.