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Last years anomalous climatic situation had a negative effect on agricultural output and, consequently, on the financial results achieved by the organizations operating in that sector.

The aggregate financial result for the period of January September in agriculture amounted to 54.9 bn Rb, which is by 12.5 % below the value of the same index for 2009. At the same time, the losses incurred by agricultural organizations rose by 84 % on January September 2009 (Table 8).

According to our decomposition 1 of quarterly indices (Table 9, Fig. 5), in 2009 2010 the rate of GDP growth increased on the average by 29 % due to changes in labor input, but the contribution of that component during the period under consideration was shrinking (from 41.8 % in Q I 2009 to 30.5 % in Q III 2010). A more substantial contribution to the rate of GDP growth was made by changes in the volume of capital input in the process of production, which on the average accounted for 54 % of growth.

By comparison with the previous years the first two quarters of 2009 were marked by certain shifts in the structure of GDP growth, namely a declining contribution of capital input with a simultaneously increasing contribution of labor input. These structural changes reflected the way in which the crisis phenomena in the economy were influencing the behavioral strategies of producers who, while adjusting to new economic conditions, tend to apply a more flexible instrument labor input management. Beginning from the second half-year 2009, there occurred a revival of the previously existing structure of output growth (typical of For more details concerning our methodology, see Faktory ekonomicheskogo rosta. Nauchnye trudy N 70.

[Factors of Economic Growth. Scientific Works No 70.] M. IET, 2003. www.iet.ru RUSSIAN ECONOMY IN trends and outlooks the pre-crisis period), which is characterized by a considerably larger contribution of capital input than that of labor input.

Table Rate of Return on Commodities, Products, Work, Services and Assets Sold by Organizations, by Type of Economic Activity, in January September 2008 2010, as % For reference Return on sold commodiSeptember January September ties, products, work, ser- Return on assets 2010 to 2010 to January Sepvices December tember rate of physical price 2008 2009 2010 2008 2009 2010 financial volume indices result index Total 15.8 11.2 11.6 6.8 3.8 5.1 152.6 104.Including: 15.0 11.4 12.2 4.5 2.9 2.5 90.7 89.3 108.agriculture, hunting and forestry fishery and fish-breeding 10.7 25.9 25.0 4.8 13.0 12.5 121.5 90.extraction of mineral resources 36.2 31.3 32.8 14.6 8.5 10.4 145.0 104.2 101.processing industries 20.6 12.3 14.4 12.1 3.9 6.0 159.7 112.6 110.production and distribution of 3.6 7.3 6.9 0.6 2.9 3.6 140.7 105.1 113.electric energy, gas and water construction 5.6 5.0 4.1 2.6 1.5 1.2 80.9 99.2 107.wholesale and retail trade; repair 11.3 7.0 8.3 7.0 3.6 5.7 169.9 104.4 106.of motor vehicles, motorcycles, household appliances and personal items transport and communications 16.4 15.8 15.0 5.0 3.9 3.7 115.8 145.Source: Rosstat.

The main factor determining the dynamics in rate of output growth in 2009 was TFP (total factor productivity), whose changes can on the average account for 73 % of the rate growth;

in 2010 the contribution of that component in the majority of periods was negative.

The negative changes in labor input resulting from the financial crisis first appeared in late 2008 and then persisted in the dynamics of economic indices in 2009 the year that saw the shrinkage of both the number of employed and their working time. In 2010, the rate of growth demonstrated by labor input was positive (0.8 % in Q I; 1.4 % in Q II; and 0.8 % in Q III), but nevertheless it was far behind the rate of decline observed over the previous year, so that the newly achieved level of labor reserves and the intensity of their use was lower than the corresponding indices recorded in 2007 2008.

The structure of labor input in the period under consideration was uneven, which reflected the economic instability on the labor market. In Q I 2009 the shrinkage of labor input was largely determined by the shorter working hours, the contribution of that component to the rate of GDP growth was nearly twice as high as the rate of output growth, which in its turn was determined by the declining number of employed. In Q II the slowdown in the rate of shrinkage of working hours was accompanied by a more rapid downslide in the number of employed, so in that period the contribution of both these components of labor input was practically the same. From Q III onwards the rate of decline demonstrated by labor reserves and the intensity of their use became slower, but this process was more rapid with regard to the latter component. As a result, in the second half-year 2009 the most significant component of labor input that determined its contribution to the rate of GDP growth was the dynamics of labor reserves. In the first two quarters of 2010, manipulating the length of working hours once again became the main instrument of adapting the labor market to changes in the market Section 4.

The Real Sector of the Economy situation: in Q I the shift of the rate of labor input growth towards positive values occurred exclusively due to longer working hours against the backdrop of the continuing shrinkage of the number of employed; in Q II, although the number of employed also began to increase, the intensity of the use of labor reserves remained the dominant factor that was determining the amount of input labor. In Q III, labor reserves were increasing at a somewhat higher rate than the intensity of their use.

Table Structure of the Rate of GDP Growth (as Compared to the Same Period of Previous Year)III quarter Q I 2009 Q II 2009 Q III 2009 Q IV 2009 Q I 2010 Q II Growth rate GDP 9.3 11.0 8.6 2.9 3.1 5.2 2.I. Factor inputs 4.9 4.2 4.2 1.0 5.0 5.0 5.I.1. Labor 3.9 3.0 1.9 0.8 0.8 1.4 0.Employment 1.3 1.5 1.0 0.7 0.2 0.5 0.Working hours 2.6 1.5 0.9 0.1 1.0 0.9 0.I.2. Capital 1.0 1.2 2.3 1.7 4.2 3.7 4.Fixed assets 1.4 1.5 1.6 1.5 1.5 1.5 1.Use of production capacities * 2.4 2.7 3.9 0.2 2.7 2.2 3.II. TFP 4.4 6.8 4.4 3.9 1.8 0.2 3.as % of rate GDP growth rate GDP 100.0 100.0 100.0 100.0 100.0 100.0 100.I. Factor inputs 52.6 38.3 49.0 32.7 158.6 97.1 211.I.1. Labor 41.8 27.7 22.5 26.2 24.7 26.6 30.Employment 14.3 14.0 11.7 22.5 6.5 9.3 16.Working hours 27.5 13.7 10.8 3.7 31.2 17.4 14.I.2. Capital 10.8 10.7 26.5 59.0 133.9 70.4 181.Fixed assets 15.4 13.7 18.8 51.6 46.4 29.0 61.Use of production capacities 26.1 24.3 45.3 7.3 87.6 41.5 119.II. TFP 47.4 61.7 51.0 132.7 58.6 2.9 111.* The estimates of the changes of the use of production capacities across the national economy are based on the data on the volume of the actually consumed electric energy.

Similarly to the situation with regard to labor cost, the manifestation of the crisis phenomena in the economy was the presence, in the overall dynamics of the capital input index, of a period during which the value of that index was on the decline. However, the duration of the period itself was shorter: instead of late 2008, it began in Q I 2009, while the shift of the capital input growth rate towards positive values was observed as early as Q IV of the same year.

In the first half-year 2009, the contribution of capital input to the rate of GDP growth amounted to almost one-third of that of labor input; in Q III, the contributions of these two components became equal. In Q IV 2009, capital inputs remained the sole factor that had a negative impact on the rate of GDP growth, i.e., it was the only index whose value was demonstrating growth in face of shrinking output. In 2010, capital inputs were growing at an accelerated rate as compared to GDP, which explains the dominant role of that component in the structure of output growth.

The deviation from the previously published results occurred due to changes in the data published by Rosstat.

RUSSIAN ECONOMY IN trends and outlooks In 2009 2010, the main factor determining the character and direction of the changes displayed by capital inputs in the first three quarters of 2009 was the volatile intensity of the use of industrial production capacities. The rate of growth in the intensity of the use of capital inputs demonstrated a decline in January September 2009, which then gave way to an upward trend from Q IV onwards. The mean quarterly growth rate over that period was 0.9 p.p. (in accordance with linear trend by 1.2 p.p.1).

The rate of growth of capital reserves remained positive throughout the entire period under consideration, although when broken up by quarter it demonstrated a slight decline from 3.% in Q I 2009 to 3.0 % in Q III 2010. In accordance with our estimation methodology,changes in capital reserves are determined by the changing volume of investments in fixed assets, whose the rate of growth remained negative until Q II 2010. At the same time, in spite of the growth of investments observed in Q II and III 2010, their volume in real terms remained not only below the 2008 level, but also below that of 2007. Thus, the declining amount of funds allocated to renewal and restoration of fixed assets, with due regard for the significant degree of their depreciation, resulted in a quarterly decline of the growth rate of capital reserves by 0.05 p.p.

Fig. 5. By Factor Decomposition of GDP Growth (as Compared with the Same Period of Previous Year), with Estimates of the Effect of Oil Prices Growth rate changes are estimated by linear trends in order to lower the dependence of the resulting estimates on the specific choice of the first and last quarters of the period under consideration.

In absence of quarterly statistics, the growth estimates of fixed assets are plotted on the assumption of constancy of the coefficient of their withdrawal and a constant share of investments earmarked for their renewal. In should be noted that the estimate obtained in this manner may be biased because it will not take into consideration the time lag between the moment when investments are received and the moment of their actual implementation.

Section 4.

The Real Sector of the Economy The contribution of unexplained residual (total factor productivity) during the period under consideration is rather controversial. In 2009, that component was the dominating factor, which determined on the average 73 % of the rate of GDP decline. In Q I and III 2010, the rate of TFP growth remained negative, thus being responsible for its negative (and sufficiently significant) contribution to the rate of output growth; in Q II the contribution of TFP was positive but no more than 3 %. In this connection, similarly to all the other components considered earlier, the dynamics of total factor productivity demonstrates a downward trend with regard to the rate of its decline, with a quarterly average of 0.2 p.p. (or 0.7 p.p. in accordance with a linear trend). However, in contrast to the input of the main factors, this slowdown in the rate of its decline is insufficient for achieving a positive TFP dynamics.

It should be noted that the meaning of TFP after a decomposition of the growth of value indices (as represented by GDP) becomes somewhat different from the traditional understanding of technology-related productivity. The estimation by TFP describes not only the changes in the intensive (and primarily technological) components that are conducive to an increased production performance, but also the exogenous shocks, the influence of other indices that are excluded from the estimation of the input of the main factors, and the shifts determined by the uneven character of output prices and capital input1, among which a significant role (especially in the short term) is played by the changes related to the dynamics of world oil prices.

In accordance with our results,2 changes in oil prices (with the exception of Q IV 2009) largely determined the rate of growth of both TFP and GDP. On the average in the period under consideration, changes in the price factor determined approximately 60 % of the rate of output growth, whereas only about 42 % was determined by technology-related productivity (final residual). Besides, after the prices on the world raw materials markets were taken as a separate factor, the changes in the rate of the technology-related components growth became different from TFP dynamics: the rate of final residuals growth was positive or close to zero only in January September 2009, and then from Q IV the technology-related component demonstrated a stable decline. On the whole, during that period the dynamics of final residual was characterized by a slower rate of growth, on the average 1.1 p.p. per quarter (or 1.8 p.p.

in accordance with linear trend).

Thus, the changes in the rate of GDP growth that were observed in 2009 2010 were accompanied by a certain transformation in the structure of its determining factors. It was characterized by a declining contribution of capital input, with a simultaneously increasing contribution of labor input, while in 2009 the role of total factor productivity remained predominant, and then in 2010 capital input once again began to play a dominant role against the backdrop of negative contribution of TFP. In this connection, changes in the growth rates of both labor input and capital input are determined in the main by fluctuations in the degree of their use (the length of working hours and the intensity of the use of production capacities).

A price-based estimate of productivity coincides with a physical one if the economy is in conditions of a long-term equilibrium and perfect competition. In other words, this coincidence takes place when all possible exogenous chocks are taken into account in the current equilibrium of the system.

The singling out of the conjecture component within TFP and the conduct of the further decomposition of the growth rate of output are based on the presence of a statistically significant interrelation between the growth rate of GDP and the growth rate of world oil prices, which is estimated with a regression analysis of annual data for the 1999-2009 period. The resulting final remainder purged of the influence of price fluctuations on world raw materials markets is a more correct characteristic of technological productivity, i.e., the intensive component of growth in output.

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