Industrial conglomerates,risk spreading and the transition in Russia

This article explains the lasting transition crisis of Russian agriculture by applying Hayami & Ruttan's theory of induced innovation. The empirical analysis uses Russian farm data. For various types of farms factor intensities and partial factor productivities are calculated to identify differences in productivity between them. We identify the mechanism through which institutional frictions in Russia influence the choice of technology and the adaptation of technological change. Finally, policy recommendations are derived to make technical change more consistent with relative factor supplies and prices, and improve productivity, especially of inefficient farm types. In our view nothing speaks in favour of expensive Western ‘high-tech’ machinery imports to enhance the efficiency of Russian farms (especially larger ones). Until now the poor operation of domestic markets in Russia has obstructed a sufficient supply of Russian technology consistent with relative scarcities.